Short Sale Constraints and Dispersion of Opinion: Evidence from the Indian Equity Market |
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Authors: | Christos I. Giannikos Eleni Gousgounis |
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Affiliation: | 1. Baruch College, The City University of New York;2. Stevens Institute of Technology |
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Abstract: | Short sale constraints can inflate market prices, as bearish investors cannot act on their market views. The paper uses data from the Indian equity market to test whether opinion dispersion leads to higher overpricing when short sales are prohibited. The Indian equity market provides a natural testing environment, as short sales were banned between 2001 and 2008. The empirical results offer supportive evidence of the relation between opinion dispersion and overpricing in a market with short sale constraints. |
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Keywords: | short sale constraints dispersion of opinion derivatives Indian equity market G14 G15 G18 |
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