Short-Sales in Global Perspective

William Goetzmann (), Arturo Bris () and Ning Zhu ()
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Arturo Bris: Yale School of Management
Ning Zhu: University of California, Davis - Graduate School of Management

Yale School of Management Working Papers from Yale School of Management

Abstract: Short-selling differs significantly around the world, and practice depends not only on regulatory structure but upon costs and tax considerations. Our survey of world markets suggests that, while as much as 93 percent of the world's equity market by capitalization is shortable, there are particular regions of the world where it is difficult to take a short position. These include several countries in Southeast Asia and South America. When dual listings in markets allowing short-sales are considered, the capitalization that is potentially shortable increases to 96 percent. In this paper, we examine what factors in the global equity universe are not shortable and consider the implications for long-short strategies tied to global indices and futures instruments. We find important periods when an index of non-shortable securities is a major determinant of the global equity portfolio. We ask whether short-sales constraints are binding on global index arbitrage.

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