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January 2009


The Effect of Short-selling Restrictions on Liquidity: Evidence from the London Stock Exchange

The London Stock Exchange commissioned research by Capital Markets CRC Limited on the effect of FSA's short selling prohibition on market quality. The research compared those FTSE 100 companies that are subject to the prohibition, against a control sample of those FTSE 100 securities that are not within the scope of the prohibition. The research indicated that market quality (defined as price volatility and liquidity) was reduced in the affected stocks in the period following the ban.

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Short-selling Restrictions and Market Quality December 2008 (pdffile pdf - 96 KB)

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