Doran, James and Jiang, Danling and Peterson, David (2007): Short-Sale Constraints and the Idiosyncratic Volatility Puzzle: An Event Study Approach.
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Using event studies, we show that short-sale constraints play an important role in the negative relation between idiosyncratic volatility and stock returns. We explore three exogenous events that change short-sale constraints: the IPO lockup period expiration, option introduction, and the recent short-selling ban on financial stocks. Following mitigation of short-sale constraints from the first two events, high idiosyncratic volatility stocks underperform low volatility stocks in the short and long run, and are associated with higher abnormal trading volume. Additionally, highly volatile financial firms experience greater price increases upon the short-sale ban enforcement and greater price drops upon the ban expiration.
|Item Type:||MPRA Paper|
|Institution:||Florida State University|
|Original Title:||Short-Sale Constraints and the Idiosyncratic Volatility Puzzle: An Event Study Approach|
|Keywords:||Idiosyncratic Volatility, Short-Sale Constraints, IPO Lockup, Option Introduction, Short-Sale Ban|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation
|Depositing User:||Danling Jiang|
|Date Deposited:||27. Mar 2009 03:22|
|Last Modified:||12. Feb 2013 12:15|
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Available Versions of this Item
Short-Sale Constraints and the Non-January Idiosyncratic Volatility Puzzle. (deposited 22. Sep 2007)
- Short-Sale Constraints and the Idiosyncratic Volatility Puzzle: An Event Study Approach. (deposited 27. Mar 2009 03:22) [Currently Displayed]