Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
➤ Gửi thông báo lỗi ⚠️ Báo cáo tài liệu vi phạmNội dung chi tiết: Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
Price Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1model that extracts common valuation information from the prices of stocks that were not banned, we estimate that the ban on short-selling financial stocks imposed by the SEC in September 2008 led to substantial price inflation in the banned stocks. For stocks experiencing negative performance prior Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1 to the ban. the inflation reversed approximately two weeks following the ban. Although stocks with positive pre-ban performance where estimated to haPrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
ve realized a similar magnitude of inflation during the ban, we find little evidence of a postban reversal for this subset of stocks. The reversal eviPrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1the pending TARP legislation may also have affected prices, though our results suggest that it was not a significant factor. If prices were inflated, buyers paid more than they otherwise would have paid for the banned stocks during the period of the ban. We provide an estimate of $2.3 to $4.9 billio Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1n for the resulting wealth transfer from buyers to sellers, depending on how post-ban reversal evidence is interpreted. Such transfers should interestPrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
policymakers concerned with maintaining fair markets.Keywords: Short-sale Ban. SEC. Securities and Exchange Commission. Short-Sale Constraints. FinanPrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1 School of Business, University of California, Irvine, and Phillips is at the University of Waterloo, School of Accounting and Finance. A portion of this work was completed while Phillips was at the University of Alberta, School of Business. All correspondence should be sent to: Ethan Namvar entail: Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1 enamvar(g>uci.edu tel.: 949-824-4622 fax.: 949-824-8469 mail: Paul Merage School of Business. University of California. Irvine. Irvine. CA. 92697-312Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
5Price Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanABSTRACTUsing a factor-analytic model that extracts common valuation informatioPrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1to substantial price inflation in the banned stocks. For stocks experiencing negative performance prior to the ban. the inflation reversed approximately two weeks following the ban. Although stocks with positive pre-ban performance where estimated to have realized a similar magnitude of inflation du Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1ring the ban, we find little evidence of a postban reversal for this subset of stocks. The reversal evidence suggests the effects of the short-sale baPrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
n may have been limited to stocks with negative price pressure prior to the ban. Other factors such as the pending TARP legislation may also have affePrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1 paid for the banned stocks during the period of the ban. We provide an estimate of S2.3 to $4.9 billion for the resulting wealth transfer from buyers to sellers, depending on how post-ban reversal evidence is interpreted. Such transfers should interest policymakers concerned with maintaining fair m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1arkets.Beginning in the summer of 2008, the U.S. Securities and Exchange Commission (SEC) implemented a series of short-sale restrictions that had sevPrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
eral intended and likely unintended consequences. This paper examines the effects OÍ the absolute ban on short-selling financial sector stocks imposedPrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1hich were facing strong. downward price pressure due to die global financial crisis. Tn particular, the commissioners feared that slock price decreases might convince depositors and other creditors that the films were in financial distress and facing significant bankruptcy risk. With such conviction Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1s, many creditors would withdraw deposits and other short-term credit facilities, which would force the firms to sell their long positions under duresPrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
s. The associated liquidation costs would further lower stock prices. These liquidity death spirals could lead to bankruptcies and substantial profitsPrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1ices and firm financial distress.1We may never know whether short-sellers were indeed manipulating prices to create liquidity death spirals. When confronted, short-sellers invariably defend their actions as motivated by stock valuation (selling short overvalued stocks) as opposed to market manipulat Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1ion objectives. Given the extreme losses that many financial firms experienced in real estate and other securities, Illis argument is credible.1 111 SPrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
EC Release No. 34-58592, die Acting Secretary, Florence E. Harmon cites an earlier SEC release dated July 15, 2008 (related to the ban on naked short-Price Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1er manipulation through the dissemination of false rumors and thereby over time to diminish the effect of these activities on our markets.”If financial stocks were indeed overvalued, or if they were merely properly valued before the ban, the ban on short-selling had a potentially serious unintended Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1consequence. By preventing short-sellers from trading, the SEC created a bias toward higher prices. The unintended consequence of this bias is that buPrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
yers could have bought at prices above fundamental value. If so, these buyers would face significant loses when prices ultimately adjust downward to tPrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1reddie Mac (FRE) and Fannie Mae (FNM) common shares were trading near 30 cents and 50 cents, respectively. During the ban, their shares rose to nearly S2.00 per share. Following the end of the ban, the share prices of both firms soon returned to approximately 60 cents per share. If the ban inflated Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1FRE and FNM share prices by preventing short-sellers from supplying liquidity to an imbalance of buyers, then buyers traded at artificially high pricePrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
s. For long sellers, (he ban on short-selling provided an unexpected windfall. We estimate that during the period of the ban, inflation may have transPrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1tsale ban to estimate the price inflation, if any, associated with the ban. Using a factor-analytic model, we provide conservative estimates of the inflation. Our estimates are based on the assumption that we can extract meaningful information about the values of the banned stocks from an analysis o Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1f the prices of the non-banned stocks.We recognize that the banned stock values may depend on factors that we could not model so that the inflation wePrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
estimate may be due to other factors besides the SEC ban. Foremost among these other factors may have been valuation effects associated with theTroubPrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1banned stocks, the inflation we estimate may not have been due to the short-selling ban. We specifically address the possibility that optimism about TARP inflated the banned stock prices. Our results suggest that concerns about the TARP do not account for the results. We are also able to exclude the Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1 potential bias of simultaneous events by examining the post-ban reversal of estimated inflation. Given the short duration of the short-sale ban, thePrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
resulting inflation should be transitory and reverse following the ban. In contrast, valuation effects associated with other potentially confounding ePrice Inflation and Wealth Transfer during the 2008 SEC Short-Sale BanLawrence E. Harris Ethan Namvar Blake Phillips*ABSTRACTUsing a factor-analytic m Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1ock prices of financial sector firms were inflated by approximately 10-12%, depending on the weights used to compute benchmark returns. For the sub-sample of stocks with more negative returns before (he ban. inflation resulting from the ban is corrected approximately 2 weeks later. Although we do no Price Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1te a similar magnitude of inflation for stocks with positive pre-ban performance, we find little evidence of a post-ban correction for (his subset ofPrice Inflation and Wealth Transfer during the 2008 SEC Short-sale Ban-1
stocks. Our ability to relate the estimated inflation to the short-sale ban is dependent in part on the identification of a post-ban reversal of inflaGọi ngay
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