Price efficiency and short selling

Pedro Saffi and Kari Sigurdson
Additional contact information
Kari Sigurdson: Barclays Global Investors and Reykjavik University

No D/748, IESE Research Papers from IESE Business School

Abstract: This paper investigates the effect of short-sale constraints on price efficiency. We use a unique global dataset on equity lending, collected from several custodians, from January 2004 to June 2006. This information is available weekly for 17,015 stocks from 26 countries. Our main findings are as follows. First, stocks with limited lending supply and high borrowing fees respond more slowly to market shocks. Second, short-sale constraints have a small impact on the distribution of weekly stock returns. Limited lending supply is associated with higher skewness, but not with fewer extreme negative returns. Third, stocks with limited lending supply and higher borrowing fees are associated with lower R2s on average.

Keywords: Short-sales constraints; market efficiency; equity lending (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2008-04-27
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Price Efficiency and Short Selling (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:iesewp:d-0748

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