Abstract

http://ssrn.com/abstract=949027
 
 

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Price Efficiency and Short Selling


Pedro A. C. Saffi


Cambridge Judge Business School - Finance

Kari Sigurdsson


AQR Capital Management

August 30, 2010

AFA 2008 New Orleans Meetings Paper
IESE Business School Working Paper No. 748
Review of Finance Studies, Vol. 24, No. 3, pp. 821-852, 2011

Abstract:     
This article studies how stock price efficiency and the distribution of returns are affected by short-sale constraints. The study is based on a global data set that includes more than 12,600 stocks from 26 countries between 2005 and 2008. Our main findings are as follows. First, lending supply has a significant impact on efficiency. Stocks with higher short-sale constraints, measured by low lending supply, have lower price efficiency. Second, relaxing short-sales constraints is not associated with an increase in either price instability or occurrence of extreme negative returns.

Number of Pages in PDF File: 41

Keywords: Short sales constraints, market efficiency, equity lending markets, extreme returns

JEL Classification: G12, G14, G15

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Date posted: December 4, 2006 ; Last revised: March 7, 2011

Suggested Citation

Saffi, Pedro A. C. and Sigurdsson, Kari, Price Efficiency and Short Selling (August 30, 2010). AFA 2008 New Orleans Meetings Paper; IESE Business School Working Paper No. 748; Review of Finance Studies, Vol. 24, No. 3, pp. 821-852, 2011. Available at SSRN: http://ssrn.com/abstract=949027

Contact Information

Pedro A. C. Saffi (Contact Author)
Cambridge Judge Business School - Finance ( email )
Trumpington Street
Cambridge, CB2 1AG
United Kingdom
Kari Sigurdsson
AQR Capital Management ( email )
United Kingdom
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