 The impact of short sale restrictions on informed trading in the stock and options marketsVan Le and Ralf Zurbruegg International Review of Economics & Finance, 2016, vol. 41, issue C, 262-273 Abstract: This paper examines the impact of short sale restrictions (SSR) on the price discovery process of stocks and their corresponding options. We utilize a new measure to examine the impact these restrictions have on information efficiency between the two instruments. Based on one year of intraday data surrounding the US emergency order of 2008, we find evidence of traders switching from SSR restricted products to a matched group of stocks and options. At the same time there is a decline in the role options provided to price discovery in the SSR affected stocks, along with a significant rise in the importance of options for the matched sample as informed traders move to trading in markets that are unaffected by the restrictions. From a policy perspective our results indicate that a greater consideration needs to be made for the impact SSR has on trade informativeness and the price discovery process, as well as how it affects the inter-related markets through the trader-switching effect. Keywords: Short sale restrictions; Options; Price discovery; Informed trading (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:41:y:2016:i:c:p:262-273 DOI: 10.1016/j.iref.2015.08.007 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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