The Impact of the 2011 Short‐Sale Ban on Financial Stability: Evidence from the Spanish Stock Market

22 Pages Posted: 22 Nov 2016

Date Written: November 2016

Abstract

We examine the effect of the 2011 short‐selling ban on Spanish stocks on the financial sector's risk level. Before the ban, short positions were positive and significantly related to several indicators of bank default risk. Subsequently, the ban moderated the risk of banking institutions, especially those more exposed to short‐seller activity, which, on average, showed higher levels of maturity mismatch, uncertainty about their fundamentals, and exposure to sovereign risk. The ban also caused a side effect on non‐financial firms, since it led to an increase in their exposure to short sales, reflecting the existence of a common aggregate risk factor.

Keywords: short‐sales constraints, financial stability, financial institutions, credit default swap, contagion

Suggested Citation

Arce, Oscar and Mayordomo, Sergio, The Impact of the 2011 Short‐Sale Ban on Financial Stability: Evidence from the Spanish Stock Market (November 2016). European Financial Management, Vol. 22, Issue 5, pp. 1001-1022, 2016. Available at SSRN: https://ssrn.com/abstract=2873973 or http://dx.doi.org/10.1111/eufm.12085

Oscar Arce (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Sergio Mayordomo

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
128
PlumX Metrics