The skinny on the 2008 naked short-sale restrictions

Fails-to-deliver, short selling, and market quality

“…In this sub-section, we empirically examine whether FTDs arise overwhelmingly from short sales (rather than "long" sales) using a natural experiment arising from the exogenous imposition by the SEC of an Emergency Boulton and Braga-Alves (2010) and Kolasinsky, et al (2012) also examine aspects of the July/August 2008 SEC Emergency Order that we investigate in this paper; while other papers - Battalio and Schultz (2011), Boehmer, et al (2011), Autore, et al (2011 and Beber and Pagano (2011) -examine the subsequent September 2008 short selling ban (that we do not examine). 13 FTDs can potentially arise from the mechanism of the offering process in price-supported IPOs (Edwards and Hanley, 2010).…”

On the relation between liquidity and the futures-cash basis: Evidence from a natural experiment

“…Trading restrictions for both markets dramatically increase the cost of arbitrage and make them infeasible, which provides an ideal quasi-natural experiment to identify the channel underlying the relation between liquidity and the futures-cash basis. 12 Trading restrictions, especially the short selling ban, could lead to increased volatility (e.g., Boulton and Braga-Alves, 2010;Boehmer, Jones, and Zhang, 2013). In untabulated results, we also control for volatility and the results remain qualitatively the same.…”

“…Using the 2007-2009 global financial crisis as a natural experiment, researchers have mainly focused on the impact of short selling bans on liquidity and pricing efficiency separately across different markets (e.g., Boulton and Braga-Alves, 2010;Beber and Pagano, 2013;Boehmer, Jones, and Zhang, 2013;Trebbi and Xiao, 2015). Focusing on the recent 2015 Chinese market crash, we tackle the real effects of regulations on liquidity and market efficiency jointly.…”

The Empirical Study on Margin Trading and Pricing Efficiency—Evidence from Natural Experiment

“…The SEC had halted short sales on 19 financial institutions on July 15, 2008, and this restriction was lifted on August 12, 2008. Boulton & Braga (2010) [2] took these 19 financial institutions and other 17 companies which were not affected by the event as study subjects, using event study and comparative method to research the influence of short-selling constraint on stock prices. The empirical study showed that, after July 15, 2008, excess returns of 19 restricted short-selling institutions were significantly higher than other 17 companies whose short selling were allowed.…”