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Short-Selling Bans Around the World: Evidence from the 2007–09 Crisis




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    • Beber is with Cass Business School and CEPR, and Pagano is with Università di Napoli Federico II, CSEF, EIEF, and CEPR. We thank Cam Harvey, an anonymous Associate Editor, an anonymous referee, Viral Acharya, Bruno Biais, Dimitris Christelis, Matthew Clifton, Anne de Graaf, Joost Driessen, Luca Enriques, Craig Holden, Harrison Hong, Tullio Jappelli, Charles Jones, Charlotte Ostergaard, Paolo Porchia, Ailsa Röell, Pedro Santa Clara, Enrique Schroth, Erik Theissen, Ingrid Werner, and seminar participants at the 2009 NYSE-Euronext-Tinbergen Institute Workshop on Liquidity and Volatility in Today's Markets, the 2010 EFA meeting, the 2010 FIRS meeting, the 2010 WFA meeting, the Autoritaet Financiële Markten, the IESE Madrid Finance Workshop, the SIFR conference Asset Allocation and Pricing in the Light of the Recent Financial Crisis, the 4th Unicredit Conference in Banking and Finance, Bocconi University, Cass Business School, the Duisenberg School of Finance, Imperial College, Rotterdam School of Management, Swiss Finance Institute at the University of Lugano, and the University of Naples Federico II. Richard Evers, Martijn Reekers, and Piyush Singh provided outstanding research assistance. Financial support from Inquire Europe and Q-Group is gratefully acknowledged.


Most regulators around the world reacted to the 2007–09 crisis by imposing bans on short selling. These were imposed and lifted at different dates in different countries, often targeted different sets of stocks, and featured varying degrees of stringency. We exploit this variation in short-sales regimes to identify their effects on liquidity, price discovery, and stock prices. Using panel and matching techniques, we find that bans (i) were detrimental for liquidity, especially for stocks with small capitalization and no listed options; (ii) slowed price discovery, especially in bear markets, and (iii) failed to support prices, except possibly for U.S. financial stocks.