Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212311 
Year of Publication: 
2015
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 3/2015
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Tracing the SEC ban on the short selling of financial stocks in September 2008, this paper investigates whether such selling activity before the 2008 short ban reflected financial companies' risk exposures in the subprime crisis. The evidence suggests that short sellers sold short stocks that had the greatest asset and insolvency risk exposures, and that the short selling of financial firms' stocks was not significantly greater than that of non-financial firms. When the short ban was in effect, the market quality of financial stocks without subprime asset exposure had deteriorated to a larger degree than that of financial companies with subprime asset exposure. The findings imply that such a regulation may mute the market disciplining effects of investors and may also serve as a counterweight to any perceived macro or systemic risk reduction benefits resulting from such a ban.
Subjects: 
short selling
subprime assets
financial crisis
short-sale ban
CDS spread
JEL: 
G01
G14
G18
G28
G33
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-028-6
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.