short selling rules and markets

Discussion in 'Wall St. News' started by zdreg, Jan 2, 2009.

  1. zdreg


    Research Shows Short Selling Restrictions Don't Affect Markets
    December 30, 2008

    The emergency short selling restrictions imposed in various markets around the world earlier this year have not changed the behavior of stock returns, according to new research from professors at London's Cass Business School.

    Professors Ian Marsh and Norman Niemer examined daily returns on U.K., U.S., Italian, French and German shares before and after the introduction of restrictions on short selling, including shares which are subject to the restrictions, and those which are not. They found that stocks subject to the restrictions behaved very similarly both to how they behaved before their imposition and to how stocks not subject to the restrictions behaved.

    Comparing behavior across countries where the nature of the restrictions differed, the authors found no systematic patterns consistent with the expected effect of the new regulations, i.e. no evidence of a reduced probability of large price falls.

    The authors also found no sign of any detrimental impact of the constraints in terms of reduced efficiency of pricing.

    Regression analysis suggested that changes in stock returns were driven mainly by other factors affecting the financial sector as a whole rather than the restrictions on short selling.

    The study was commissioned by the International Securities Lending Association, the Alternative Investment Management Association and the London Investment Banking Association.

    who is affected by short sale restriction rules?
    who is harmed? who benefits?
  2. kaciara


    who benefits? not the retail trader of course

    nor the long-mid-short term investor too

    MM? may be

  3. I have the believe that one of the causes of the black week was the short sale restrictions on financial sector stocks.

    I'm not making any big studies to determine this, but Im simply looking at some facts that are impossible to ignore.

    We've never had a "Black Week" before. We've had "Black days" such as black monday, black tuesday, black wednesday... but we've never had a week full of black days... So I'm not exactly convinced with their study saying that the movement of stock prices was just normal.

    It gave me the impression (from watching the market move during those days), that by removing short sellers they managed to remove greed, one of the two sentiments that move markets, from the equation; leaving only fear as the driving force on the way down.

    During the black week there was no small pullback's after each drop in price, no one was taking profits on the way down... short sellers don't accelerate down movements they slow them down as their greed induces them to take a profit.
  4. lescor


    All it did was remove liquidity from the market. It was plainly obvious to anyone actively trading those stocks. Spreads were wider, price moves more erratic.

    Hasn't every study ever done on short selling come to the same conclusion?
  5. A.) I completely agree with Lescor

    B.) This is little piece seems to be a soft sell for short restrictions (academics are regulation loving libtards for the most part) and they're willing to ignore data and lie with statistics to do it.

    But here's a question: if short sale restrictions have no impact on the market, then why go to the trouble of having them?
  6. Would you like the truth on short selling restrictions? Do you really think it doesn't happen just because there is a restriction?

    Are you starting to get the idea that the inmates run the asylum? Do you get the idea Donaldson, Cox, Pitt, Levitt are liars- shills for the industry? Can you see why we're in the fix we're in.

    1. Oh my God!!! Ban short selling in financials. C, Ms, they'll be destroyed.

    2. Don't really ban short selling. Let it happen behind the scenes. Don't release the data.

    3. Say, "the banning of short selling didn't do anything. It's a mistake."

    A few of you get it. I 'm waiting for the rest of you to wake up, and decide yo don't like being suckers.