Implications of Allowing & Removing Short Selling: Empirical Evidence from Malaysia Stock Market
Mohamed Ziauddin, Syed Ebrahim (2010) Implications of Allowing & Removing Short Selling: Empirical Evidence from Malaysia Stock Market. [Dissertation (University of Nottingham only)] (Unpublished)
Short selling regulations have been changed few times in a decade in the Malaysian Stock Exchange market. First the government removed the restrictions placed on short selling, and then due to the Asian Financial Crisis the government suspended short selling in order to avoid speculations in the market. Then again after almost a decade, the government reintroduced short selling in the market. These events taking place provides an opportunity to study the effect these events have on market behaviour such as market skewness, market volatility, market liquidity and market return. Thirty stocks were selected from Kuala Lumpur Stock Exchange (KLSE) on the basis that they were allowed for short selling twice during 1996 and 2007. This data is then analysed with dummy variables such as SS feasibility (short selling feasibility) and Crisis (financial crisis) to study the impact it has on the market. For the first time frame, the findings suggest that the removal of short selling restrictions has no effect on the market skewness and market liquidity. However the introduction of short selling during this period reduces the volatility in the market. The market return was measured using cumulative abnormal returns and the returns increased as a result of the removal of short selling restriction and the cumulative abnormal returns decreased when short selling restriction were placed again.
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