Financial Markets cannot function effectively without short selling
17 March 2011 Data Explorers
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Will Duff Gordon hosted a panel of three short selling academics at the Data Explorers London Securities Financing Forum.
Each academic made their case for short selling by providing a summary of their key findings in their individual research which is available at dataexplorers.com/research.
Dr. Alessandro Beber, Amsterdam Business School compared the performance of markets in countries that impose a short selling ban and those that do not. The costs and benefits of short selling and the effects to single stocks were weighed up. A key finding was the fact that banning short selling has a detrimental effect on liquidity. It was found that the negative effect on liquidity is at approximately 25% in countries with a ban. Liquidity problems are seen to be further amplified in small, volatile or non-option stocks.
Ekkehar Boehmer, EDHEC Business School, used the daily shorting flow in the US markets to carry out their research. Findings showed that short selling accounts for a large proportion of trading activity, 28% in 2008. Dr. Pedro Saffi led with “Don’t shoot the short selling messenger”!
The academics were asked to consider a perception that short sellers “boost bubbles and then prick the bubble” to profit.
The research papers are available to download; http://www.dataexplorers.com/research
Each academic made their case for short selling by providing a summary of their key findings in their individual research which is available at dataexplorers.com/research.
Dr. Alessandro Beber, Amsterdam Business School compared the performance of markets in countries that impose a short selling ban and those that do not. The costs and benefits of short selling and the effects to single stocks were weighed up. A key finding was the fact that banning short selling has a detrimental effect on liquidity. It was found that the negative effect on liquidity is at approximately 25% in countries with a ban. Liquidity problems are seen to be further amplified in small, volatile or non-option stocks.
Ekkehar Boehmer, EDHEC Business School, used the daily shorting flow in the US markets to carry out their research. Findings showed that short selling accounts for a large proportion of trading activity, 28% in 2008. Dr. Pedro Saffi led with “Don’t shoot the short selling messenger”!
The academics were asked to consider a perception that short sellers “boost bubbles and then prick the bubble” to profit.
The research papers are available to download; http://www.dataexplorers.com/research
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