SSRN-The Efficacy of Short Selling Restrictions: Evidences from Italy in Post-Lehman Turmoil by Gianluca Mattarocci, Gabriele Sampagnaro

More evidence, this time from Italy, that last year's short selling bans did not achieve their desired reductions in volatility.

SSRN-The Efficacy of Short Selling Restrictions: Evidences from Italy in Post-Lehman Turmoil by Gianluca Mattarocci, Gabriele Sampagnaro:

"By analyzing the effect on daily price returns and volatility following the addition of short selling constrains, and using some control procedure able to isolate them from possible crisis induced movements, our results do not indicate a common impact of the restrictions. While the results on the performance change show some difference in the trend of mean performance before and after the short selling constraint that is particularly relevant for those stock without traded options, the results concerning the volatility impact show a general increase of the post-restriction variance the most part of which can be attributable to the short selling bans. This finding appear contrary to the basic belief of market regulators to consider short selling ban as an useful tool able to mitigate volatility and speculative behaviors; new restrictions on short sellers are likely to reduce the amount of information incorporated into stock prices."