The 2008 short sale ban: Liquidity, dispersion of opinion, and the cross-section of returns of US financial stocks

Autore, Don M.; Billingsley, Randall S.; Kovacs, Tunde

doi:10.1016/j.jbankfin.2011.01.026

Cited by 75 publications

(28 citation statements)

References 46 publications

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“…Using U.S. and European data, Lioui (2011) documents an increase in volatility in response to the 2008 short-selling ban, but no effect on the price skewness. Autore, Billingsley, and Kovacs (2011) document that during the 2008 short-sale ban in the U.S., stocks with a larger decline in liquidity also have poorer contemporaneous returns, consistent with the model of Amihud and Mendelson (1986). Harris, Namvar, and Phillips (2013) use a factor model to document price inflation in banned stocks as a result of the 2008 short-selling ban in the U.S., particularly for firms without traded options.…”

Section: Introductionmentioning

confidence: 58%

Predatory Short Selling*

2013

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Abstract. Financial institutions may be vulnerable to predatory short selling. When the stock of a financial institution is shorted aggressively, leverage constraints imposed by short-term creditors can force the institution to liquidate long-term investments at fire sale prices. For financial institutions that are sufficiently close to their leverage constraints, predatory short selling equilibria co-exist with no-liquidation equilibria (the vulnerability region) or may even be the unique equilibrium outcome (the doomed region). Increased coordination among short sellers expands the doomed region, where liquidation is the unique equilibrium. Our model provides a potential justification for temporary restrictions on short selling of vulnerable institutions and can be used to assess recent empirical evidence on short-sale bans.

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Section: Introductionmentioning

confidence: 58%

Predatory Short Selling*

2013

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“…Autore et al (2011) argue that restricting short sales may lead to declines in market liquidity through at least three channels. First, short sellers who have a notable share in total trading volume are banned from the market.…”

Section: Another Line Of Short Selling Research Examines the Associatmentioning

confidence: 99%

Impact of short selling activity on market dynamics: Evidence from an emerging market

Sobaci

Şensoy

Erturk

2014

Journal of Financial Stability

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“…In this sub-section, we empirically examine whether FTDs arise overwhelmingly from short sales (rather than "long" sales) using a natural experiment arising from the exogenous imposition by the SEC of an Emergency Boulton and Braga-Alves (2010) and Kolasinsky, et al (2012) also examine aspects of the July/August 2008 SEC Emergency Order that we investigate in this paper; while other papers - Battalio and Schultz (2011), Boehmer, et al (2011), Autore, et al (2011 and Beber and Pagano (2011) -examine the subsequent September 2008 short selling ban (that we do not examine). 13 FTDs can potentially arise from the mechanism of the offering process in price-supported IPOs (Edwards and Hanley, 2010).…”

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confidence: 99%

Fails-to-deliver, short selling, and market quality

Fotak

Raman

Yadav

2014

Journal of Financial Economics

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We investigate the collective net impact on market liquidity and pricing efficiency of equity trades that result in fails to deliver ("FTDs"). Given the nature of the US electronic trade settlement system for stocks, such "FTD trades" should originate almost exclusively from short sales, and we confirm this empirically on the basis of a natural experiment arising from a regulatory event. For a sample of 1,492 NYSE common stocks over a 42-month period from 2005 to 2008, we find that such trades lead to the same beneficial impact on liquidity and pricing efficiency as short sales that result in timely delivery. We do not find evidence that such trades are causally related to subsequent price declines or distortions, or to the failure of financial firms during the 2008 financial crisis.

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The 2008 short sale ban: Liquidity, dispersion of opinion, and the cross-section of returns of US financial stocks

Cited by 75 publications

References 46 publications

Predatory Short Selling*

Predatory Short Selling*

Impact of short selling activity on market dynamics: Evidence from an emerging market

Fails-to-deliver, short selling, and market quality

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