Short selling bans and price responses in a multimarket setting

Yu Hu, Pankaj K. Jain, Suchismita Mishra, Robinson Reyes‐Peña
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Abstract

We evaluate the role of short sale bans in muting the price response to negative earnings surprises for stocks cross‐listed in foreign unbanned markets. We update the global timeline of short sale restrictions up to the COVID‐19 crisis. Given low dispersion of beliefs, we observe that the effects of a stock's home market bans extend to unbanned markets, as manifested in lagged price responses, reduced short interest, and failures to deliver. In contrast, large profit opportunities created by high dispersion of beliefs trigger cross‐border short selling (regulatory arbitrage) and a leading price response in foreign unbanned markets vis‐à‐vis the home market.
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多市场环境下的卖空禁令和价格反应
我们评估了卖空禁令在抑制在国外非禁令市场交叉上市的股票价格对负面盈利意外的反应方面所起的作用。我们更新了截至 COVID-19 危机的全球卖空限制时间表。鉴于信念的低离散性,我们观察到股票在本国市场的禁令影响延伸到了未被禁市场,表现为滞后的价格反应、利空减少以及无法交割。与此相反,高度分散的信念所创造的巨大获利机会会引发跨境卖空(监管套利),并在国外未被禁市场上产生相对于本国市场的领先价格反应。
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