EconPapers    
Economics at your fingertips  
 

Short Sales Constraints and Financial Stability: Evidence from the Spanish 2011 Ban

Oscar Arce () and Sergio Mayordomo ()

No 25/12, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: This paper studies the main effects of the short sales ban implemented in August 2011 in the Spanish stock market along two dimensions: financial stability and market performance. Regarding the first, we show that short positions were a significant determinant of the probability of default of medium-sized banks before the ban. We find that, by weakening the contagion effect coming from the sovereign risk, the ban helped stabilise the probability of default of medium-sized banks, an effect which is not significant in the case of the largest banks and non-financials. Nonetheless, the stabilising power of the ban came at the cost of a large decline in the relative liquidity, trading volumes and price information efficiency of medium-sized banks stocks.

Keywords: Short-sales constraints; financial stability; financial institutions; credit default swap; contagion (search for similar items in EconPapers)
JEL-codes: G01 G12 G14 G18 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2012-12-21
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.unav.edu/documents/10174/6546776/1356050306_WP_UNAV_25_12.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:una:unccee:wp2512

Access Statistics for this paper

More papers in Faculty Working Papers from School of Economics and Business Administration, University of Navarra
Bibliographic data for series maintained by ().

 
Page updated 2020-06-24
Handle: RePEc:una:unccee:wp2512