This study looks at the inefficiency of stock indices of France, Italy, and Spain around their financial regulatory authorities’ short sale ban during the COVID-19 pandemic crisis. The empirical analysis of this study provides evidence of price predictability of the basis of futures contract prior to the short-sale restriction. Moreover, the results show a significant underpricing in futures contracts of FTSE MIB and IBEX35 indices while the two months of short sale banned period. These findings suggest that prohibiting short selling during the market downturn might undermine the stock markets' efficiency and generate arbitrage opportunities for speculative investors.
|Journal||Journal of Asset Management|
|Publication status||Accepted/In press - 13 Dec 2021|
|Event||2021 Cross Country Perspectives in Finance Symposium for JIFMIM - Online|
Duration: 24 Jun 2021 → 26 Sep 2021
- market efficiency
- futures arbitrage