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Testing the Effects of Short-Selling Restrictions on Asset Prices

Rodrigo De-Losso and Bruno Giovannetti ()

No 2012_18, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: Testing the effects of short-selling restrictions on asset prices is challenging: shifts in stock lending supply usually are not observed directly. This paper takes advantage of a unique dataset that contains actual shifts in the lending supply curve for several stocks on the Brazilian market. The dataset comprises daily information from January 2009 to July 2011 from the whole stock lending market in Brazil. We find that short-selling restrictions generate overpricing and that this effect increases with greater dispersion of investor opinion, consistent with a number of theoretical studies.

Keywords: asset prices; short-selling restrictions; stock lending (search for similar items in EconPapers)
JEL-codes: G01 G10 G12 (search for similar items in EconPapers)
Date: 2012-09-12
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