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

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.

Type: Position paper
Date: le 16/04/2009
Research Cluster : Finance

See Also

EDHEC-Risk Instute paper on value in sovereign bond markets accepted by the Journal of Fixed Income
News
- 12-09-2019
We are pleased to enclose an EDHEC-Risk Institute research article published in the...
EDHEC Faculty welcomes Oxford professor Renée B. Adams for a reseach seminar
News
- 11-09-2019
On September 12, 2019, EDHEC faculty will be delighted to welcome Oxford professor...
Riccardo Rebonato will unveil the results of the 12th EDHEC-Risk European ETF & Smart Beta Survey on Sept 23 in London
News
- 03-09-2019
Riccardo Rebonato, Professor of Finance, EDHEC Business School, EDHEC-Risk Institute,...
Launch of the
News
- 03-09-2019
EDHEC Business School and Scientific Beta have announced the launch of the “Advanced...