Short-selling bans and contagion risk

Amelia Pais () and Philip Stork
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Amelia Pais: Massey University, http://www.massey.ac.nz

Journal of Financial Transformation, 2012, vol. 35, 109-122

Abstract: Starting in September 2008 stock market regulators across the world introduced, at different times and for different durations, bans on short-selling financial institution’s shares. The argument for the bans is that short selling increases the volatility and contagion risk of financial institutions. This paper uses Extreme Value Theory to calculate univariate and contagion risks across financial institutions, and the effect of short selling on those risks in banks in Belgium, France, Italy and Spain. We find that changes in these downside risk metrics are positively related to changes in short-selling positions.

Keywords: short selling; short-selling ban; stock market; Extreme Value Theory; univariate risk; contagion risk; risk metrics (search for similar items in EconPapers)
JEL-codes: G11 G24 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1532

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