Short selling in France during the crisis, the bans, and what has changed since the Euro correction

E Fragniere, I Markov

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

In the wake of the stock market turmoil of 2008, market regulators all over the world started imposing restrictions on short selling. This chapter examines the restrictions on short selling France, which introduced a naked short selling ban and disclosure regime for financial stocks. The study shows that the overall effect of the short selling ban in France was not positive. The introduction of the ban was followed by a short period in which affected stocks slightly outperformed unaffected stocks, which could be attributed to certain short-term behavioral effects of the short selling ban. However, the statistical analysis presented earlier shows that the portfolios of restricted and unrestricted stocks evolve with only minor differences. The comparison of France and Switzerland reveals that Swiss financial stocks, which were affected by the ban for only 3 months, move in an almost identical manner as French ones both inside and outside the ban period in Switzerland. Swedish financial stocks denominated in euros perform worse than French stocks, although if the distortive effect of the krona's depreciation is eliminated, it produces a high degree of similarity. The case of France, which still maintains a ban on naked short selling and a disclosure regime for short positions, shows that the restrictions were ineffective both in the context of France and in comparison to other countries.
Original languageEnglish
Title of host publicationHandbook of Short Selling
EditorsG N Gregoriou
PublisherElsevier
Pages219-233
Number of pages15
ISBN (Print)9780123877246
DOIs
Publication statusPublished - 2012

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