Evidence Against Short Sale Bans

The following is an excerpt from a Wall Street Journal Blog that mentions the research on short-selling bans conducted by finance professors Robert Battalio and Paul Schultz. To read the entire article visit: Evidence Against Short Sale Bans


New research supports the notion that instituting temporary short-selling bans during stock market downturns doesn’t do any good.

This might not seem like shocking news to those who believe you have to let market forces play themselves out, even in volatile times, and to those who distinguish between the impact of short selling, the borrowing of shares with the expectation of buying them later at a lower price, and flat-out selling.

Excerpt

In this latest look at short-selling bans, Federal Reserve Bank of New York economist Hamid Mehran teamed with Robert Battalio and Paul Schultz, both of whom are finance professors at the University of Notre Dame.

Harkening back to the dark days of the financial crisis in the U.S., they studied the two-week ban on short selling of financial stocks that was imposed in 2008 in a futile attempt to stop the massive sector bleeding.

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