An Academic View
The Effectiveness of
In times of financial turmoil, regulators often try to stabilize market prices through short-selling restrictions. But is this an effective strategy?
As the COVID-19 virus continues to tighten its grip on the world, causing wide spread lockdowns and large-scale disruptions to global supply chains, governments, central banks and regulators have been left with little choice but to intervene in financial markets. To try and protect markets from further price declines, regulators have implemented short-selling bans in seven countries with potentially more following suit at the time of this writing.
We discuss the effectiveness of this strategy in stemming further asset price declines.