Short-selling ban proved ineffective: NY Fed paper


New regulations banning naked short-selling has done little to stop the slide in stock prices and has significantly increased the cost of liquidity, according to a New York Federal Reserve paper, published on Saturday.

Robert Battalio, Hamid Mehran and Paul Schultz, the paper's authors, note that in response to the sharp decline in prices of financial stocks during the fall of 2008, regulators in a number of countries banned short-selling of particular stocks and industries.

The authors find

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