Abstract
Exploiting cross-sectional and time-series variations in European regulations during the July 2008 – June 2009 period, we show that: Prohibition on covered short selling raises bid-ask spread and reduces trading volume, prohibition on naked short selling raises both volatility and bid-ask spread, disclosure requirements raise volatility and reduce trading volume, and no regulation is effective against price decline. Overall, all short-sale regulations are detrimental to market efficiency. However, naked short-selling prohibition is the only regulation that leaves volumes unchanged while addressing the failure to deliver. Therefore, we argue that this is the least damaging to market efficiency.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
