The Effects of Short Selling on Financial Markets Volatilities

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

European Journal of Business Science and Technology, 2019, vol. 5, issue 2, 218-228

Abstract: The paper investigates the relationship between short selling activities of stocks on the volatility of the US market and its sectors. We apply the multivariate DCC GARCH Model on the NYSE US 100 Index between November 2017 and October 2018. We find evidence that investments in some specific firms on the market reduce the market volatility and higher short selling activities reduce risk in the market. The study also finds that firms in the financial sector dominate the market and short selling activities in this sector has a greater impact on the market volatility. We also find portfolio managers to be better off investing in the market than creating portfolio within sectors.

Keywords: short selling; market volatility; dynamic conditional correlation (search for similar items in EconPapers)
JEL-codes: C58 G12 G15 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:men:journl:v:5:y:2019:i:2:p:218-228

DOI: 10.11118/ejobsat.v5i2.183

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