The Impact of Margin Trading and Short Selling by Retail Investors on Market Price Efficiency: Empirical Evidence from Bitcoin Exchanges

2022 ◽  
pp. 102689
Author(s):  
Jan-Oliver Strych
Keyword(s):  
Empirical Evidence ◽  
Market Price ◽  
Short Selling ◽  
Price Efficiency ◽  
Retail Investors ◽  
The Impact

Why Do Short Selling Bans Increase Adverse Selection and Decrease Price Efficiency?

2020 ◽  
Author(s):  
Peter N Dixon
Keyword(s):  
Empirical Evidence ◽  
Adverse Selection ◽  
Information Acquisition ◽  
Market Price ◽  
Negative Information ◽  
Short Selling ◽  
Price Efficiency ◽  
Theoretical Predictions

Abstract When short selling is costly, owners of an asset have greater incentive to become informed than nonowners because trading on negative information is easier for them. Thus, information acquisition concentrates among investors owning the asset. A short selling ban restricts selling to only the relatively more informed investors who own the asset, increasing adverse selection but only on the sell side of the market. Price efficiency declines due to less overall information acquisition because a ban magnifies the disincentive to gather information for investors not owning the asset. Empirical evidence from the 2008 U.S. short selling ban is consistent with these theoretical predictions. (JEL G10, G14, G18)

Short selling regulation, return volatility and market volatility in the Athens Exchange

2017 ◽  
Vol 34 (1) ◽  
pp. 82-104 ◽  
Author(s):  
Charilaos Mertzanis
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Empirical Evidence ◽  
Market Price ◽  
Short Selling ◽  
Market Volatility ◽  
Short Sales ◽  
Content Type ◽  
Regulation Policy ◽  
The Impact

Purpose The relationship between short selling, market volatility and liquidity remains an object of intensive research. However, empirical evidence is yet to provide a conclusive elucidation of this relationship by examining aspects of market fragmentation in the form of different market settings, different timing and different stocks under coverage, among others. This paper aims to contribute to the debate by investigating the impact of short selling on market volatility and liquidity in the Athens Exchange (ATHEX) under three different periods of short sales restrictions. Design/methodology/approach Two hypotheses are tested using econometric methodologies (co-integration and Granger-causality tools). Findings The empirical results indicate that when short selling is allowed, aggregate stock returns are in the short-term more volatile, but the liquidity of the market is not significantly affected. This might be the result of significant imbalances between supply and demand of stock caused by short-selling restrictions, leading to market price fluctuations. Research limitations/implications The analysis of empirical evidence needs further expansion and association with institutional firm-level and country-level elements to provide a more comprehensive understanding of the impact of short selling on market volatility and liquidity. Practical implications Stock market regulation involving short-selling restrictions have different implications according to extent and degree of stringency of the restrictions as well as the market on which they are imposed. That is especially important for the assessment of the market impact of the recent European Union regulation on short selling that has been imposed upon all EU member-States alike. Social implications Financial regulation policy must balance the benefits and costs for retail investors of imposing short-selling restrictions on stock market trading. Originality/value First-time empirical evidence is provided on the impact of short selling regulations on market volatility and liquidity of ATHEX highlighting the potential effectiveness of regulation policy.

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. https://arabixiv.org/b9vg8/download

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

ABSTRACTThis paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. https://frenxiv.org/am8zy/download

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk.

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. https://osf.io/preprints/socarxiv/dh9mr/download

scholarly journals A New Model for Pricing Collateralized Financial Derivatives

2018 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Empirical Data ◽  
Market Price ◽  
Financial Derivatives ◽  
New Model ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral posting and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. Acknowledge: The empirical data were provided by FinPricing at http://www.finpricing.com/lib/IrSwap.html https://osf.io/preprints/socarxiv/fvdzh/download

scholarly journals A New Model for Pricing Collateralized OTC Derivatives

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Credit Risk ◽  
Empirical Evidence ◽  
Market Price ◽  
New Model ◽  
Otc Derivatives ◽  
Risk Measurements ◽  
The Impact ◽  
Unique Dataset

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. https://osf.io/preprints/lissa/y2wqc/download

Sign in / Sign up

Export Citation Format

Share Document