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Title: Effects of short-selling regulations on overpricing and liquidity in the Malaysian stock market
Authors: Xie, Alicia Xinrong
Huang, Tai Lun
Lim, Wei Qin
Keywords: DRNTU::Business
Issue Date: 2013
Abstract: This report investigates the effects of short-selling regulations in the Malaysian equity market on market liquidity and overpricing. Our results indicate that during a financial crisis, short-sale constraints will not support stock prices, and instead lead to lower abnormal returns. This disproves our hypothesis that short-sale constraints lead to stock overpricing during a financial crisis. However, shortable stocks earn lower abnormal returns in general, indicating that short-sale constraints do not support stock prices only in periods of financial crisis. Our results, using bid-ask spread and intra-day volatility indicate that short-sale constraints lead to reduced market liquidity during both periods of financial crisis and pre-financial crisis. This supports the hypothesis that short-selling constraints prevent pessimistic investors from trading on the stocks, which lead to lower trading volume and liquidity.
Rights: Nanyang Technological University
Fulltext Permission: restricted
Fulltext Availability: With Fulltext
Appears in Collections:NBS Student Reports (FYP/IA/PA/PI)

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