Abstract (eng)
In August 2011 the financial authorities in France, Spain, Italy and Belgium adopted a covered short sale ban on financial institutions. In this paper, I study the impact of this short-selling ban on stock returns, liquidity and volatility. I analyze various test periods before and after the introduction of the ban to quantify changes over time. The stocks subjected to the ban suffered degradation in market quality, measured by the relative bid-ask spread. The positive effect on stock return was only short-term. There was an especially strong short-term positive effect on stock prices in the Developing and PIGS country subgroup. However, there is no statistically significant positive effect on stock returns in the long-term horizon. The impact on intraday volatility is inconclusive. The short-term jump of excess volatility of the banned stocks is compensated in the long-term horizon.