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EnglishDuring the recent COVID-19 pandemic crisis, stock markets around the world have witnessed an abrupt decline in security prices and an unprecedented increase in security volatility. In response to a week of financial turmoil on the main European stock markets, some market regulators in Europe, including France, Austria, Italy, Spain, Greece, and Belgium, passed temporary short-selling bans in an attempt to stop downward speculative pressures on the equity market and stabilize and maintain investors’ confidence. This paper examines the effects of these short-selling bans on market quality during the recent pandemic caused by the spread of COVID-19. Our results suggest that during the crisis, banned stocks had higher information asymmetry, lower liquidity, and lower abnormal returns compared with non-banned stocks. These findings confirm prior theoretical arguments and empirical evidence in other settings that short-selling bans are not effective in stabilizing financial markets during periods of heightened uncertainty. In contrast, they appear to undermine the policy goals market regulators intended to promote.
| Titolo: | Banning Cassandra from the market? An empirical analysis of short-selling bans during the Covid-19 crisis | |
| Data di pubblicazione: | 2020 | |
| Data di prima pubblicazione online: | 2020 | |
| Autori: | ||
| Autori: | Siciliano, Gianfranco; Ventoruzzo, Marco | |
| Rivista: | EUROPEAN COMPANY AND FINANCIAL LAW REVIEW | |
| Abstract: | During the recent COVID-19 pandemic crisis, stock markets around the world have witnessed an abrupt decline in security prices and an unprecedented increase in security volatility. In response to a week of financial turmoil on the main European stock markets, some market regulators in Europe, including France, Austria, Italy, Spain, Greece, and Belgium, passed temporary short-selling bans in an attempt to stop downward speculative pressures on the equity market and stabilize and maintain investors’ confidence. This paper examines the effects of these short-selling bans on market quality during the recent pandemic caused by the spread of COVID-19. Our results suggest that during the crisis, banned stocks had higher information asymmetry, lower liquidity, and lower abnormal returns compared with non-banned stocks. These findings confirm prior theoretical arguments and empirical evidence in other settings that short-selling bans are not effective in stabilizing financial markets during periods of heightened uncertainty. In contrast, they appear to undermine the policy goals market regulators intended to promote. | |
| Digital Object Identifier (DOI): | http://dx.doi.org/10.1515/ecfr-2020-0019 | |
| Appare nelle tipologie: | 01 - Article in academic journal / Articolo su rivista scientifica |
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http://hdl.handle.net/11565/4037283
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