Short selling bans, banking share price dynamics tick by tick empirical evidence - an international comparison

Wang, X 2011, Short selling bans, banking share price dynamics tick by tick empirical evidence - an international comparison, Doctor of Philosophy (PhD), Economics, Finance and Marketing, RMIT University.


Document type: Thesis
Collection: Theses

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Title Short selling bans, banking share price dynamics tick by tick empirical evidence - an international comparison
Author(s) Wang, X
Year 2011
Abstract In September 2008, when the financial markets faced rising tension and uncertainty, many countries introduced a ban on short selling activity. This PhD thesis analyses the impact of the bans on banking share price return and volatility in the ban periods by using tick by tick data. The study also explores the impact on market liquidity by examining the changes in bid-ask spread and trading volume.

An event study method is applied and distinguishes between equal weighted and market value weighted averages. This study compares the impact on banned stocks and non-banned stocks identified as control stocks. It also compares performances prior to the ban, during the period of the ban and subsequent to the ban.

Overall, the evidence suggests the abnormal return of banned stocks increased when the short selling ban was introduced in all countries except the UK. It decreased significantly upon lifting of the ban. The abnormal return of both banned and control stocks was generally negative in all countries except the US.

Volatility decreased during the ban and went down further after the ban was lifted in Australia, Japan and Germany II [2010 ban], but it did not demonstrate this trend in other countries. As such, the mixed evidence suggests a significant shift in volatility of banking stocks.

As expected, bid-ask spread widened when short selling was banned, and it tightened thereafter. This consistent trend has been found in all countries under study.

As for trading activity, banned stocks experienced lower trading volume and turnover during the ban and higher volume when the shorting was subsequently allowed.
Degree Doctor of Philosophy (PhD)
Institution RMIT University
School, Department or Centre Economics, Finance and Marketing
Keyword(s) Short selling ban
banking share
financial crisis
panel regression
tick by tick data
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Created: Thu, 13 Sep 2012, 13:12:10 EST by Brett Fenton
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