4 research outputs found
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Short-sales constraints and the diversification puzzle
Disagreement about stock valuation, combined with short-sales constraints, can increase asset prices. We build a model showing that, so long as investor beliefs are not perfectly correlated, investors will disagree less about the value of a conglomerate than about each of its individual divisions. This generates a conglomerate discount, with disagreement and short-sales constraints being complementary in explaining its cross-sectional variation. We test these predictions empirically and find substantial support: conglomerates have lower differences of opinion and lower short-sales constraints than pure-play firms. Furthermore, greater differences of opinion and tighter short-sales constraints are significant predictors of valuation differences between conglomerates and pure plays.Cambridge Endowment for Research in Finance (CERF
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A survey of short selling regulations
Given the complex and controversial nature of short-selling regulation, we review the academic literature and provide insights for policymakers and academics. We organize the complex history of short-selling regulation into three areas: trading restrictions, securities lending regulations, and disclosure requirements. We identify, analyze, and discuss 45 distinct regulations promulgated from 1896 to 2021, primarily by reviewing the academic literature and the data sources employed. We provide several insights regarding the effectiveness of regulatory approaches and the wider impact of short-selling regulation on markets