Short-Sale Constraints, Bid-Ask Spreads, and Information Acquisition

2013 ◽  
Author(s):  
Hong Liu ◽  
Yajun Wang
Keyword(s):  
Information Acquisition ◽  
Short Sale Constraints ◽  
Short Sale ◽  
Bid Ask Spreads

Short-sale constraints, information acquisition, and asset prices

2017 ◽  
Vol 172 ◽  
pp. 273-312 ◽  
Author(s):  
Mahdi Nezafat ◽  
Mark Schroder ◽  
Qinghai Wang
Keyword(s):  
Information Acquisition ◽  
Asset Prices ◽  
Short Sale Constraints ◽  
Short Sale

Asset Pricing Implications of Short-Sale Constraints in Imperfectly Competitive Markets

2019 ◽  
Vol 65 (9) ◽  
pp. 4422-4439 ◽  
Author(s):  
Hong Liu ◽  
Yajun Wang
Keyword(s):  
Information Acquisition ◽  
Competitive Markets ◽  
Market Prices ◽  
Short Sale Constraints ◽  
Market Makers ◽  
Short Sale ◽  
Bid Ask Spread ◽  
Imperfectly Competitive ◽  
Endogenous Information ◽  
The Impact

We study the impact of short-sale constraints on market prices and liquidity in imperfectly competitive markets in which market makers have market power. In contrast to the existing literature, we show that because competition is imperfect, short-sale constraints decrease bid prices, increase ask prices, and drive up bid-ask spread volatility, with or without information asymmetry. If market makers are risk neutral, then short-sale constraints do not affect ask prices or ask depths. In addition, the impact of short-sale constraints can increase with market transparency. Our main results are unaffected by endogenous information acquisition or reduced information revelation because of short-sale constraints. This paper was accepted by Gustavo Manso, finance.

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