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


Blackrock

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
Blackrock ( email )
Murray House
1 Royal Mint Court
London, EC3N4HH
United Kingdom
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