WFE paper says academic research shows short-selling bans are disruptive. Again.

What does academic research say about short-selling bans?
Published by: The WFE Research Team
29 Apr 2020

The WFE has published a paper that reviews the academic literature on short-selling and short-selling bans, comparing the arguments against banning short-selling with the arguments in favour.

The WFE’s paper – What does academic research say about short-selling bans? – finds that the academic evidence almost unanimously points towards short-selling bans being disruptive for the orderly functioning of markets, as they are found to reduce liquidity, increase price inefficiency and hamper price discovery. Indeed, the evidence suggests that banning short-selling during periods of heightened uncertainty seems to exacerbate, rather than contain, market volatility.

The full paper is available at https://www.world-exchanges.org/our-work/articles/wfe-research-what-does-academic-research-say-about-short-selling-bans

Editor’s Note: yet another industry body has published an academic review showing why short-selling bans are harmful to organized markets. The WFE has published this same information before, yet some in the global regulatory community haven’t gotten the message. Here it is again.

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