Short sales restrictions and market quality: Evidence from Korea

Yunsung Eom, Jaehoon Hahn and Wook Sohn

Journal of Behavioral and Experimental Finance, 2021, vol. 30, issue C

Abstract: We examine changes in volatility and market quality around the shorting ban during the 2008 global financial crisis in a unique policy environment in Korea. Using intraday quotes and transaction data, we find no evidence that the shorting ban increased volatility or worsened liquidity. While the ban was lifted only for nonfinancial stocks, the patterns of change in volatility and market quality were similar across nonfinancial and financial stocks, suggesting that the changes in volatility and market quality around the shorting ban and its removal were likely to have been driven by changes in overall market conditions rather than the shorting ban itself.

Keywords: Short-selling ban; Financial crisis; Stock market volatility; Market quality; Liquidity; Spread; Market depth (search for similar items in EconPapers)
JEL-codes: G01 G14 G18 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:30:y:2021:i:c:s2214635021000484

DOI: 10.1016/j.jbef.2021.100504

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