Back to the futures: When short selling is banned

George J. Jiang, Yoshiki Shimizu and Cuyler Strong

Journal of Financial Markets, 2022, vol. 61, issue C

Abstract: We examine the effect of single-stock futures (SSFs) trading on the price discovery and market quality of underlying stocks during the 2008 short-selling ban in the United States. We find a significant increase in SSFs trading volume for banned stocks during the ban period. We show that the contribution of SSFs trading to underlying stock price discovery also increased significantly. Moreover, SSFs trading helped mitigate the negative effect of the short-selling ban on market quality. Although SSFs trading in the U.S. still lags other countries, our findings project an increasingly important role for them in the U.S. financial market.

Keywords: Short-selling ban; Financial crisis; Single-stock futures; Price discovery; Market quality (search for similar items in EconPapers)
JEL-codes: G01 G14 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:61:y:2022:i:c:s1386418122000283

DOI: 10.1016/j.finmar.2022.100735

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