Abstract
The Stock Exchange of Singapore suspended trading for three days from December 2, 1985 to December 4, 1985. When trading was resumed on December 5, 1985, contracts could only be done on an immediate delivery basis (i.e., delivery and settlement within 24 hours) which implies that short selling was severely restricted. This immediate delivery ruling lasted for about one month. We find that when the immediate delivery ruling was enforced, i.e., when short sales opportunities were restricted, volatility of stock returns increased. We also find some evidence of reverse leverage or asymmetric effect in stock returns when short sales were severely restricted.
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