Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Fails-to-Deliver, Short Selling, and Market Quality
AU - Fotak, Veljko
AU - Raman, Vikas
AU - Yadav, Pradeep
PY - 2014/12/10
Y1 - 2014/12/10
N2 - We investigate the aggregate market quality impact of equity shares that fail to deliver (hereafter “FTDs”). For a sample of 1,492 NYSE stocks over a 42-month period from 2005 to 2008, greater FTDs lead to higher liquidity and pricing efficiency, and their impact is similar to our estimate of delivered short sales. Furthermore, during the operative period of a Security and Exchange Commission (SEC) order mandating stock borrowing prior to short sales, the securities affected display relatively lower liquidity and higher pricing errors. Finally, we do not find any evidence that FTDs caused price distortions or the failure of financial firms during the 2008 financial crisis.
AB - We investigate the aggregate market quality impact of equity shares that fail to deliver (hereafter “FTDs”). For a sample of 1,492 NYSE stocks over a 42-month period from 2005 to 2008, greater FTDs lead to higher liquidity and pricing efficiency, and their impact is similar to our estimate of delivered short sales. Furthermore, during the operative period of a Security and Exchange Commission (SEC) order mandating stock borrowing prior to short sales, the securities affected display relatively lower liquidity and higher pricing errors. Finally, we do not find any evidence that FTDs caused price distortions or the failure of financial firms during the 2008 financial crisis.
KW - Naked short selling
KW - Short selling
KW - Failure to deliver
U2 - 10.1016/j.jfineco.2014.07.012
DO - 10.1016/j.jfineco.2014.07.012
M3 - Journal article
VL - 114
SP - 493
EP - 516
JO - Journal of Financial Economics
JF - Journal of Financial Economics
SN - 0304-405X
IS - 3
ER -