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The Effects of Short Selling on Financial Markets Volatilities

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  • Kwaku Boafo Baidoo

    (Mendel University in Brno, Czech Republic)

Abstract

The paper investigates the relationship between short selling activities of stocks on the volatility of the US market and its sectors. We apply the multivariate DCC GARCH Model on the NYSE US 100 Index between November 2017 and October 2018. We find evidence that investments in some specific firms on the market reduce the market volatility and higher short selling activities reduce risk in the market. The study also finds that firms in the financial sector dominate the market and short selling activities in this sector has a greater impact on the market volatility. We also find portfolio managers to be better off investing in the market than creating portfolio within sectors.

Suggested Citation

  • Kwaku Boafo Baidoo, 2019. "The Effects of Short Selling on Financial Markets Volatilities," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 5(2), pages 218-228.
    • Handle: RePEc:men:journl:v:5:y:2019:i:2:p:218-228
    DOI: 10.11118/ejobsat.v5i2.183
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    References listed on IDEAS

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    More about this item

    Keywords

    short selling; market volatility; dynamic conditional correlation;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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