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The 2008 Short Sale Ban: Did We Sell Price Discovery Short

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The 2008 Short Sale Ban: Did We Sell Price Discovery Short

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dc.contributor.author Chang, Yen-Ling en_US
dc.date.accessioned 2010-07-19T19:54:45Z
dc.date.available 2010-07-19T19:54:45Z
dc.date.issued 2010-07-19
dc.date.submitted January 2010 en_US
dc.identifier.other DISS-10634 en_US
dc.identifier.uri http://hdl.handle.net/10106/4909
dc.description.abstract This dissertation investigates the impact of a short sale ban on the stock market and the options market and the interrelation between the two markets during the US financial crisis of 2008. The first essay focuses on the impact of the short sale ban on financial stocks between September 18, 2008 and October 8, 2008. I examine how daily returns responded to the ban. Non-banned firms with similar sizes and standard deviations of past stock returns as the banned firms served as a control group. An event study shows significant positive cumulative abnormal returns which might indicate that the banned firms were overvalued during the short sale ban. Cross-sectional multivariate regression analysis suggests that the driving force of stock overvaluation was the market's inability to allow operation of differing beliefs. The second essay investigates the response of the options market to the short sale ban. Only stocks on which options are traded are selected from among banned and control firms. I use put-call parity to examine whether there is a price discrepancy between implied stock prices and actual stock prices before and after the short sale ban. The results show a significant difference between actual stock prices and implied stock prices for banned firms and control firms during and after the short sale ban, although determinants of the discrepancy are inconclusive. The third essay links the options market with the stock market to examine information propagation. I use a vector error correction model to examine the lead-lag relation between prices in stock and options markets. There are two different approaches to investigate the price discovery process: (1) Hasbrouck's (1995) information share model and (2) Gonzalo and Granger's (1995) permanent-transitory model. The results indicate that stock and options markets for banned firms are interconnected through a common factor, but both two decomposition methods show that the stock market dominates in the price discovery process. en_US
dc.description.sponsorship Sarkar, Salil en_US
dc.language.iso EN en_US
dc.publisher Finance & Real Estate en_US
dc.title The 2008 Short Sale Ban: Did We Sell Price Discovery Short en_US
dc.type Ph.D. en_US
dc.contributor.committeeChair Sarkar, Salil en_US
dc.degree.department Finance & Real Estate en_US
dc.degree.discipline Finance & Real Estate en_US
dc.degree.grantor University of Texas at Arlington en_US
dc.degree.level doctoral en_US
dc.degree.name Ph.D. en_US
dc.identifier.externalLink https://www.uta.edu/ra/real/editprofile.php?onlyview=1&pid=617
dc.identifier.externalLinkDescription Link to Research Profiles

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