Testing the Effects of Short-Selling Restrictions on Asset Prices
38 Pages Posted: 23 Aug 2012 Last revised: 4 Jun 2014
Date Written: June 3, 2014
Testing the effects of short-selling restrictions on asset prices is challenging: shifts in stock lending supply, the standard proxy for shifts in short-selling restrictions, usually are not observed directly. This paper takes advantage of a unique dataset that contains actual shifts in the lending supply curve for several stocks on the Brazilian market. The dataset comprises daily information from January 2009 to July 2011 from the whole stock lending market in Brazil. We fi nd that short-selling restrictions generate overpricing and that this effect increases with greater dispersion of investor opinion, consistent with a number of theoretical studies.
Keywords: short-selling restrictions, stock lending supply, asset prices
JEL Classification: G01, G12
Suggested Citation: Suggested Citation