Bear Raids and Short Sale Bans: Is Government Intervention Justifiable?

Richmond Mathews and Naveen Khanna
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Richmond Mathews: Duke University
Naveen Khanna: Michigan State University

No 165, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: incur significant trading losses in the process. We find that for a large enough existing stake, the value of ensuring the right decision offsets these trading losses. However, when his existing stake is inadequate, short sellers succeed in destroying value. Whether this justifies intervention depends on the expected value loss from inefficient decisions versus the costs of intervention.

Date: 2010
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