European Business Schools Librarian's Group
IESE Research Papers,
IESE Business School
No D/748: Price efficiency and short selling
Pedro Saffi () and Kari Sigurdson
Additional contact information
Pedro Saffi: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
Kari Sigurdson: Barclays Global Investors and Reykjavik University
Abstract: This paper investigates the effect of short-sale constraints on price efficiency. We use a unique global dataset on equity lending, collected from several custodians, from January 2004 to June 2006. This information is available weekly for 17,015 stocks from 26 countries. Our main findings are as follows. First, stocks with limited lending supply and high borrowing fees respond more slowly to market shocks. Second, short-sale constraints have a small impact on the distribution of weekly stock returns. Limited lending supply is associated with higher skewness, but not with fewer extreme negative returns. Third, stocks with limited lending supply and higher borrowing fees are associated with lower R2s on average.
Keywords: Short-sales constraints; market efficiency; equity lending
59 pages, April 27, 2008
Full text files
DI-0748-E.pdf
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