Short sales restrictions and market quality: Evidence from Korea

Yunsung Eom; Jaehoon Hahn; Wook Sohn

doi:10.1016/j.jbef.2021.100504

Short sales restrictions and market quality: Evidence from Korea

Yunsung Eom, Jaehoon Hahn, Wook Sohn

Department of Business Administration

Research output: Contribution to journal › Article › peer-review

Abstract

We examine changes in volatility and market quality around the shorting ban during the 2008 global financial crisis in a unique policy environment in Korea. Using intraday quotes and transaction data, we find no evidence that the shorting ban increased volatility or worsened liquidity. While the ban was lifted only for nonfinancial stocks, the patterns of change in volatility and market quality were similar across nonfinancial and financial stocks, suggesting that the changes in volatility and market quality around the shorting ban and its removal were likely to have been driven by changes in overall market conditions rather than the shorting ban itself.

Original language	English
Article number	100504
Journal	Journal of Behavioral and Experimental Finance
Volume	30
DOIs	https://doi.org/10.1016/j.jbef.2021.100504
Publication status	Published - 2021 Jun

Bibliographical note

Funding Information:
Eom gratefully acknowledges research support from Hansung University . Hahn acknowledges support from the BK21 FOU R in 2021.

Publisher Copyright:
© 2021 Elsevier B.V.

All Science Journal Classification (ASJC) codes

Finance

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title = "Short sales restrictions and market quality: Evidence from Korea",

abstract = "We examine changes in volatility and market quality around the shorting ban during the 2008 global financial crisis in a unique policy environment in Korea. Using intraday quotes and transaction data, we find no evidence that the shorting ban increased volatility or worsened liquidity. While the ban was lifted only for nonfinancial stocks, the patterns of change in volatility and market quality were similar across nonfinancial and financial stocks, suggesting that the changes in volatility and market quality around the shorting ban and its removal were likely to have been driven by changes in overall market conditions rather than the shorting ban itself.",

author = "Yunsung Eom and Jaehoon Hahn and Wook Sohn",

note = "Funding Information: Eom gratefully acknowledges research support from Hansung University . Hahn acknowledges support from the BK21 FOU R in 2021. Publisher Copyright: {\textcopyright} 2021 Elsevier B.V.",

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AU - Hahn, Jaehoon

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N2 - We examine changes in volatility and market quality around the shorting ban during the 2008 global financial crisis in a unique policy environment in Korea. Using intraday quotes and transaction data, we find no evidence that the shorting ban increased volatility or worsened liquidity. While the ban was lifted only for nonfinancial stocks, the patterns of change in volatility and market quality were similar across nonfinancial and financial stocks, suggesting that the changes in volatility and market quality around the shorting ban and its removal were likely to have been driven by changes in overall market conditions rather than the shorting ban itself.

AB - We examine changes in volatility and market quality around the shorting ban during the 2008 global financial crisis in a unique policy environment in Korea. Using intraday quotes and transaction data, we find no evidence that the shorting ban increased volatility or worsened liquidity. While the ban was lifted only for nonfinancial stocks, the patterns of change in volatility and market quality were similar across nonfinancial and financial stocks, suggesting that the changes in volatility and market quality around the shorting ban and its removal were likely to have been driven by changes in overall market conditions rather than the shorting ban itself.

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Short sales restrictions and market quality: Evidence from Korea

Abstract

Bibliographical note

All Science Journal Classification (ASJC) codes

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