The use of short-selling bans in different countries has greatly caught the attention of policy modelling. Our study is among the first studies to try to explain the phenomenon of different bank price reactions in terms of country and stock market conditions, looking at both the stock price reaction and risk. Overall, our findings suggest that the impacts of these bans on overall market efficiency were heterogeneous and, in most cases, modest for the countries analysed. Indeed, either we do not observe any improvements or the improvements are only short-lived. For the first time, we document that banks react differently to ban restrictions mostly because of differences in terms of their fundamental factors (balance sheet indicators). Given that Us and Asia-Pacific banks react differently to a ban on short selling depending on the particular financial structure of each market, when taking these actions, policy makers should consider which firm characteristics are most important and should pay attention to whether these interventions are effective in the market. Moreover, short-selling restrictions did not contribute to containing the volatility of the financial stocks subjected to the bans; on the contrary, our results indicate that negative volatility increased in some countries.

Previati, D.A., Galloppo, G., Aliano, M., & Paimanova, V. (2021). Why do banks react differently to short-selling bans? Evidence from the Asia-Pacific area and the United States. THE QUARTERLY REVIEW OF ECONOMICS AND FINANCE: JOURNAL OF THE MIDWEST ECONOMICS ASSOCIATION, 80, 144-158 [10.1016/j.qref.2021.01.015].

Why do banks react differently to short-selling bans? Evidence from the Asia-Pacific area and the United States

Previati D. A.
;
2021

Abstract

The use of short-selling bans in different countries has greatly caught the attention of policy modelling. Our study is among the first studies to try to explain the phenomenon of different bank price reactions in terms of country and stock market conditions, looking at both the stock price reaction and risk. Overall, our findings suggest that the impacts of these bans on overall market efficiency were heterogeneous and, in most cases, modest for the countries analysed. Indeed, either we do not observe any improvements or the improvements are only short-lived. For the first time, we document that banks react differently to ban restrictions mostly because of differences in terms of their fundamental factors (balance sheet indicators). Given that Us and Asia-Pacific banks react differently to a ban on short selling depending on the particular financial structure of each market, when taking these actions, policy makers should consider which firm characteristics are most important and should pay attention to whether these interventions are effective in the market. Moreover, short-selling restrictions did not contribute to containing the volatility of the financial stocks subjected to the bans; on the contrary, our results indicate that negative volatility increased in some countries.
Previati, D.A., Galloppo, G., Aliano, M., & Paimanova, V. (2021). Why do banks react differently to short-selling bans? Evidence from the Asia-Pacific area and the United States. THE QUARTERLY REVIEW OF ECONOMICS AND FINANCE: JOURNAL OF THE MIDWEST ECONOMICS ASSOCIATION, 80, 144-158 [10.1016/j.qref.2021.01.015].
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11590/385592
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