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That's the conclusion from the preliminary results of a new paper by Ekkehart Boehmer of Texas A&M, Charles Jones of Columbia, and Cornell's Xiaoyan Zhang. They studied the impact of the short-sale ban which lasted between mid-September to early October and found that:

the start of the shorting ban is associated with a sharp increase in share prices for affected stocks, consistent with most models of shorting constraints. Shorting activity drops by about 85%. Stocks subject to the ban suffered a severe degradation in market quality, as measured by spreads, price impacts, and intraday volatility.

The following chart shows the daily price changes for banned and non-banned stocks, click here for larger:

short_ban_small.jpg

Source: S.E.C. Short-Sale Ban Was Pretty Much Useless