The impact of naked short selling on the securities lending and equity market

Long‐run Effects of Minimum Trading Unit Reductions on Stock Prices

“…This indicates that if there is greater overvaluation for a stock for which there is a greater difference of opinion, its price falls more when the difference of opinion is resolved through the releaseof information. Recent studies include those of Asquith et al (2005), Boehme et al (2006), Boulton and Braga-Alves (2010), Chang et al (2007), Chen et al (2002), Cohen et al (2007), Diether et al (2002), Jones and Lamont(2002)andLecce et al (2012) Boehme et al (2009),. for example, find evidence consistent with bothMerton (1987) andMiller (1977).…”

Short‐selling and credit default swap spreads—Where do informed traders trade?

“…Diamond and Verrecchia (1987) model shortsellers as rational and informed traders that take advantage of mispricing, and note that market participants do not short-sell for liquidity reasons because they do not have use of the sale proceeds. Theory also predicts that prices diverge from fundamental values when short-selling is constrained (e.g., Duffie, Garleanu, & Pedersen, 2002;Miller, 1977;and Hong, Scheinkman, & Xiong, 2006;Lecce, Lepone, McKenzie, & Segara, 2012). This prediction is supported by empirical evidence that finds overpricing is reduced when short selling constraints are relaxed (e.g., Cohen, Diether, & Malloy, 2007;Danielsen & Sorescu, 2001;Jones & Lamont, 2002).…”

Fails‐to‐Deliver before and after the Implementation of Rule 203 and Rule 204

“…Another strand of literature argues that FTDs can have negative effect on equity markets. Lecce, Lepone, McKenzie and Segara (2012) use data from Australian stock exchange and find slightly higher stock return volatility and a small reduction in liquidity when naked short sales are allowed. Autore, Boulton and Braga-Alves (2015) find that stocks reaching threshold levels of failures become significantly overvalued; thus, high FTDs can also be considered as a binding short-sale constraint.…”