2012-11-01
Do option markets undo restrictions on short sales? Evidence from the 2008 short-sale ban
Publication
Publication
Journal of Financial Economics , Volume 106 - Issue 2 p. 331- 348
The effectiveness of any sanction depends on the costs of avoiding its restrictions. We examine whether bearish option strategies were substitutes for short sales during the September 2008 short-sale ban. We find a significant diminution in option volumes and a significant increase in option bid-ask spreads for banned stock relative to unbanned stock during the ban period. Apparent violations of the put-call parity bound became significantly more frequent for banned stocks during the ban period. We conclude that the ban acted as an effective restriction on trading in options.
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doi.org/10.1016/j.jfineco.2012.05.013, hdl.handle.net/1765/38949 | |
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Journal of Financial Economics | |
Organisation | Erasmus Research Institute of Management |
Grundy, B., Lim, B., & Verwijmeren, P. (2012). Do option markets undo restrictions on short sales? Evidence from the 2008 short-sale ban. Journal of Financial Economics, 106(2), 331–348. doi:10.1016/j.jfineco.2012.05.013 |