The impact of naked short selling on the securities lending and equity market

Steven Lecce, Andrew Lepone (), Michael D. McKenzie and Reuben Segara

Journal of Financial Markets, 2012, vol. 15, issue 1, 81-107

Abstract: This paper examines the impact of naked short selling on equity markets where it is restricted to securities on an approved list. Consistent with Miller's (1977) intuition, stocks with the highest dispersion of opinions and short sale constraints are the only stocks to exhibit significant and negative abnormal returns in the post-event period. We also find slightly higher stock return volatility and a small reduction in liquidity when naked short sales are allowed. Overall, it impairs market quality (liquidity and volatility), although there appears to be some improvement in price efficiency in stocks with high short sale constraints.

Keywords: Short sale constraints; Liquidity; Naked short selling; Australian Securities Exchange; Regression discontinuity design (search for similar items in EconPapers)
JEL-codes: G10 G14 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:15:y:2012:i:1:p:81-107

DOI: 10.1016/j.finmar.2011.07.001

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