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《Review of Investment Studies》 2016-09
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Do Short Sale Restrictions Help to Stabilize the Stock Market?——An Empirical Evidence from China's Stock Market

Li Fengsen;  
Whether or not short sales should be prohibited or restricted is a long controversial issue. From the viewpoint of market stability, we analyze the policy effects of the restrictive measures imposed on short sales during the Chinese stock market crash in 2015. We find some evidence that during the market crash, the trading volumes and price volatility of marginable stocks are significantly lower than those of non-marginable stocks, and stock returns significantly higher. We also find that the trading volumes of heavily shorted stocks are collectively lower than those of lightly shorted stocks, price volatility significantly lower and stock returns significantly higher. Short sales are not the cause of the market crash. Short sale restrictions don't help to stabilize the stock market, they might have made the situation even worse.
【Key Words】: Margin Trading Short Sale Stock Market Financial Crisis Financial Stability
【CateGory Index】: F832.51
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