Short sales restrictions and market quality: Evidence from Korea

Yunsung Eom, Jaehoon Hahn, Wook Sohn

Research output: Contribution to journalArticlepeer-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 languageEnglish
Article number100504
JournalJournal of Behavioral and Experimental Finance
Volume30
DOIs
Publication statusPublished - 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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