Abstract
We investigate the impact of the short selling ban in 2020 and the persistent effects
in months after the ban imposed by some European countries on equity market
liquidity returns and volatility. We find that the short selling ban had a detrimental
impact on stock market liquidity, volatility and little effect on returns. These
effects are persistent in 6 months after the ban. Market liquidity remains lower,
while volatility stayed heightened. Larger companies experienced stronger declines
in market conditions during the ban, while smaller companies exhibit substantial
negative effects in first three months after the ban. Altogether, the findings provide
a clearer picture of the impact of short selling bans than much of the existing
literature suggests.
in months after the ban imposed by some European countries on equity market
liquidity returns and volatility. We find that the short selling ban had a detrimental
impact on stock market liquidity, volatility and little effect on returns. These
effects are persistent in 6 months after the ban. Market liquidity remains lower,
while volatility stayed heightened. Larger companies experienced stronger declines
in market conditions during the ban, while smaller companies exhibit substantial
negative effects in first three months after the ban. Altogether, the findings provide
a clearer picture of the impact of short selling bans than much of the existing
literature suggests.
| Original language | English |
|---|---|
| Number of pages | 40 |
| Publication status | In preparation - 2023 |