The 2008 Short Sale Ban: Did We Sell Price Discovery Short

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dc.contributor Chang , Yen -Ling en_US 2010 -07 -19T19 :54 :45Z 2011 -08 -24T21 :43 :42Z 2010 -07 -19T19 :54 :45Z 2011 -08 -24T21 :43 :42Z 2010 -07 -19 January 2010 en_US
dc.identifier.uri http : / /hdl .handle .net /10106 /4909
dc.description.abstract This dissertation investigates the impact of a short sale ban on the stock market and the options market and the interrelation between the two markets during the US financial crisis of 2008 . The first essay focuses on the impact of the short sale ban on financial stocks between September 18 , 2008 and October 8 , 2008 . I examine how daily returns responded to the ban . Non -banned firms with similar sizes and standard deviations of past stock returns as the banned firms served as a control group . An event study shows significant positive cumulative abnormal returns which might indicate that the banned firms were overvalued during the short sale ban . Cross -sectional multivariate regression analysis suggests that the driving force of stock overvaluation was the market's inability to allow operation of differing beliefs . The second essay investigates the response of the options market to the short sale ban . Only stocks on which options are traded are selected from among banned and control firms . I use put -call parity to examine whether there is a price discrepancy between implied stock prices and actual stock prices before and after the short sale ban . The results show a significant difference between actual stock prices and implied stock prices for banned firms and control firms during and after the short sale ban , although determinants of the discrepancy are inconclusive . The third essay links the options market with the stock market to examine information propagation . I use a vector error correction model to examine the lead -lag relation between prices in stock and options markets . There are two different approaches to investigate the price discovery process : (1 ) Hasbrouck's (1995 ) information share model and (2 ) Gonzalo and Granger's (1995 ) permanent -transitory model . The results indicate that stock and options markets for banned firms are interconnected through a common factor , but both two decomposition methods show that the stock market dominates in the price discovery process . en_US
dc.language.iso EN en_US
dc.publisher Finance & Real Estate en_US
dc.title The 2008 Short Sale Ban : Did We Sell Price Discovery Short en_US
dc.type Ph .D . en_US


The 2008 Short Sale Ban: Did We Sell Price Discovery Short. Available electronically from http : / /hdl .handle .net /10106 /4909 .

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