Abstract

http://ssrn.com/abstract=1825803
 
 

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Do Short Selling Restrictions Destabilize Stock Returns? Lessons from Taiwan


Martin T. Bohl


University of Muenster

Badye Essid


HEC Montreal - Institute of Applied Economics

Pierre L. Siklos


Wilfrid Laurier University - School of Business & Economics

November 1, 2010

Paolo Baffi Centre Research Paper No. 2011-88

Abstract:     
Short sellers have been routinely blamed for triggering, or exacerbating, stock market declines. The experience of Taiwan provides an interesting case study of the impact of short selling bans on stock returns volatility in a time series framework due to the length of time the short selling ban was in place there. Estimating several variants of an asymmetric GARCH model and a Markov switching GARCH model we find robust evidence that short selling restrictions raise stock returns volatility. The only qualifier is that the impact of short sale bans is a feature of the expansionary phase of business cycles. During recessions this effect dissipates.

Number of Pages in PDF File: 33

Keywords: Short-Selling Bans, Taiwanese Stock Market, Asymmetric GARCH Models, Markov Switching Models

JEL Classification: G12, G14, G18

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Date posted: May 1, 2011  

Suggested Citation

Bohl, Martin T. and Essid, Badye and Siklos, Pierre L., Do Short Selling Restrictions Destabilize Stock Returns? Lessons from Taiwan (November 1, 2010). Paolo Baffi Centre Research Paper No. 2011-88. Available at SSRN: http://ssrn.com/abstract=1825803 or http://dx.doi.org/10.2139/ssrn.1825803

Contact Information

Martin T. Bohl
University of Muenster ( email )
D-48149 Muenster
Germany
Badye Essid
HEC Montreal - Institute of Applied Economics
3000, ch. de la Côte-Ste-Catherine
Montréal, Quebec H3T 2A7
Canada
Pierre L. Siklos (Contact Author)
Wilfrid Laurier University - School of Business & Economics ( email )
Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext. 2559 (Phone)
519-888-1015 (Fax)
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