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Back to the futures: When short selling is banned

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  • Jiang, George J.
  • Shimizu, Yoshiki
  • Strong, Cuyler

Abstract

We examine the effect of single-stock futures (SSFs) trading on the price discovery and market quality of underlying stocks during the 2008 short-selling ban in the United States. We find a significant increase in SSFs trading volume for banned stocks during the ban period. We show that the contribution of SSFs trading to underlying stock price discovery also increased significantly. Moreover, SSFs trading helped mitigate the negative effect of the short-selling ban on market quality. Although SSFs trading in the U.S. still lags other countries, our findings project an increasingly important role for them in the U.S. financial market.

Suggested Citation

  • Jiang, George J. & Shimizu, Yoshiki & Strong, Cuyler, 2022. "Back to the futures: When short selling is banned," Journal of Financial Markets, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finmar:v:61:y:2022:i:c:s1386418122000283
    DOI: 10.1016/j.finmar.2022.100735
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    References listed on IDEAS

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    More about this item

    Keywords

    Short-selling ban; Financial crisis; Single-stock futures; Price discovery; Market quality;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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