Short selling and trading abuses on Nasdaq |
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Institution: | 1. Montpellier Business School, 2300, Avenue des Moulins, 34185 Montpellier Cedex 4, France\n;2. Emlyon business school, Campus Casablanca, La Marina Tour Cristal 1, Casablanca, Morocco;3. ICD International Business School, 12 rue Alexandre Parodi, 75010 Paris, France;4. Le Mans University (Gains-Argumans), Avenue Olivier Messiaen, 72085 Le Mans, France |
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Abstract: | We examine the potential for short-selling trading abuses unique to Nasdaq during a period when there was no up-tick rule and no effective prohibitions against “naked” short selling. We find that (a) short sellers earned significant abnormal returns on Nasdaq securities, but these were smaller than on NYSE/AMEX securities; (b) they did not destabilize markets by selling into falling markets and exacerbating price drops; and (c) Nasdaq short sellers may be more susceptible than NYSE/AMEX shorts to “short squeezes”. Our results cast doubt on the appropriateness of recent regulatory reforms established for Nasdaq and public concern over Nasdaq short-selling abuses. |
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