The impact of lifting the short-sale price restriction on volatility and liquidity in Taiwan

Ching-Chung Lin

Applied Financial Economics, 2008, vol. 18, issue 20, 1657-1665

Abstract: The restriction of short-sale prices, which states that short-sale prices must not be lower than the closing price of the previous trading day, no longer applies to the constituent stocks of the Taiwan Top 50 Index. This study investigates the impact of restriction lifting on the trading activities and volatilities of those component stocks. The empirical results show that while the trading activities of those component stocks do not change, their volatilities increase significantly. Moreover, stocks with a lower percentage of margin transactions experience higher volatility.

Date: 2008
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DOI: 10.1080/09603100701720401

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