The Undesirable Effects of Banning Short Sales

An in-depth study of the short-selling market calls into question both the reasons for the decision to ban short selling and the prejudices that weigh on those who short.

Author(s) :

Abraham Lioui

Professor of Finance, EDHEC Risk and Asset Management Research Centre

Presentation :

According to recently published data (for the United States in particular), a large majority of short sellers are market makers who are hedging their bets on the options markets. They were not affected by the ban, which means that those who were using options to take synthetic short positions continued to do so. The others involved in short selling are mainly hedge funds. The average return over the last ten years for hedge funds that used short-sale, convertible arbitrage and long/short strategies was 3%, 4.75% and 7.00% respectively (Le Sourd 2009). One can hardly argue that they were over-informed and that they earned abnormal returns.
Pdf
The Undesirable Effects of Banning Short Sales...
(1.82 MB)
Type : Position paper
Date : le 16/04/2009
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Séverine Anjubault, Direction de la recherche de l'EDHEC [ severine.anjubault@edhec.edu ] Les opinions exprimées sont celles des auteurs et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

See Also

- 06-04-2017
This week, to bring current and future challenges facing leaders directly to the classroom, the EDHEC Global MBA launches two 18-hour core courses devised and taught in collaboration with...
- 04-04-2017
The distinctive Multirank assessment ranks 1,500 prestigious schools and universities worldwide, including 74 French institutions.  EDHEC stands out in 2017 as the French business...
Frédéric Oudéa, Chief Executive Officer of Société Générale, meets EDHEC students
- 31-03-2017
Société Générale is one of the 3 banks in France’s CAC 40 stock index. The bank’s Chief...
- 30-03-2017
Close to 900 people attended the 9th edition of EDHEC Research Day held on Tuesday, 14 March 2017 on the EDHEC Lille Campus. We are very grateful for your interest and your role in the...