Time-Varying Effect of Short Selling on Market Volatility During Crisis: Evidence from COVID-19 and War in Ukraine

Kwaku Boafo Baidoo
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Kwaku Boafo Baidoo: Mendel University in Brno, Czech Republic

European Journal of Business Science and Technology, 2022, vol. 8, issue 2, 233-243

Abstract: In this paper, we empirically investigate the effect of short selling on market volatility during exogenously-induced uncertainties. Using the Covid-19 pandemic and the onset of the Russian-Ukraine Conflicts periods as event study, we employ the asymmetric EGARCH model. We show high persistence and asymmetric effects of market volatility during the pre-covid outbreak and post-covid outbreak periods. We find evidence that short selling increases market volatility during the pre-covid outbreak period while the period of the Russian-Ukraine conflict is characterized by reduced volatility. We find no evidence of short selling effect on market volatility during the post-covid outbreak period. Our findings provide significant implications for short-selling strategies during crisis periods.

Keywords: short-selling; market volatility; COVID-19; Russian-Ukraine conflict (search for similar items in EconPapers)
JEL-codes: C22 G11 G12 G14 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:men:journl:v:8:y:2022:i:2:p:233-243

DOI: 10.11118/ejobsat.2022.013

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