The 2008 short-selling Ban’s impact on tail risk

Bartl, Jonas; Bostandzic, Denefa; Irresberger, Felix; Weiß, Gregor; Yang, Ruomei

Abstract

We examine how the 2008 U.S. short-selling ban on the stocks of financial institutions impacted their equity tail risk. Using propensity score matching and difference-in-difference regressions, we show that the ban was not effective in restoring financial stability as measured by the stocks’ dynamic Marginal Expected Shortfall. In contrast, especially large institutions, those who were most vulnerable to market downturns in the preban period, as well as those equities with associated put option contracts, experienced sharp increases in their exposure to market downturns during the ban period, contrary to regulators’ intentions.

Citation

Bartl, J., Bostandzic, D., Irresberger, F., Weiß, G., & Yang, R. (2024). The 2008 short-selling Ban’s impact on tail risk. Journal of Empirical Finance, 78, Article 101532. https://doi.org/10.1016/j.jempfin.2024.101532

• Journal Article Type: Article
• Acceptance Date: Aug 10, 2024
• Online Publication Date: Aug 20, 2024
• Publication Date: 2024-09
• Deposit Date: Aug 21, 2024
• Publicly Available Date: Aug 22, 2024
• Journal: Journal of Empirical Finance
• Print ISSN: 0927-5398
• Electronic ISSN: 1879-1727
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 78
• Article Number: 101532
• DOI: https://doi.org/10.1016/j.jempfin.2024.101532
• Keywords: Short-selling ban; tail risk; financial stability; financial crisis JEL Classification Numbers: G14; G18
• Public URL: https://durham-repository.worktribe.com/output/2763292