Short Selling and Trading Abuses on Nasdaq

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" shortselling. Wefindthat(a)shortsellersearnedsignificantabnormalreturnsonNas- daq securities, but these were smaller than...

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Bibliographic Details
Published in:Financial services review (Greenwich, Conn.) Conn.), 1997-03, Vol.6 (1), p.27-39
Main Authors: Albert Jr, Robert L., Smaby, Timothy R., Robison, H. David
Format: Article
Language:English
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Summary: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" shortselling. Wefindthat(a)shortsellersearnedsignificantabnormalreturnsonNas- daq securities, but these were smaller than on NYSF_/AMEX securities; (b) they did not destabilize markets by selling intofalling 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 establishedfor Nasdaq and public concern over Nasdaq short-selling abuses.
ISSN:1873-5673
1057-0810
DOI:10.1016/S1057-0810(97)90030-5