Effects of short-selling regulations on overpricing and liquidity in the Malaysian stock market

This report investigates the effects of short-selling regulations in the Malaysian equity market on market liquidity and overpricing. Our results indicate that during a financial crisis, short-sale constraints will not support stock prices, and instead lead to lower abnormal returns. This disproves...

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Main Authors: Xie, Alicia Xinrong, Huang, Tai Lun, Lim, Wei Qin
Other Authors: Lau Sie Ting
Format: Final Year Project
Language:English
Published: 2013
Subjects:
Online Access:http://hdl.handle.net/10356/51589
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-515892023-05-19T06:24:04Z Effects of short-selling regulations on overpricing and liquidity in the Malaysian stock market Xie, Alicia Xinrong Huang, Tai Lun Lim, Wei Qin Lau Sie Ting Nanyang Business School DRNTU::Business This report investigates the effects of short-selling regulations in the Malaysian equity market on market liquidity and overpricing. Our results indicate that during a financial crisis, short-sale constraints will not support stock prices, and instead lead to lower abnormal returns. This disproves our hypothesis that short-sale constraints lead to stock overpricing during a financial crisis. However, shortable stocks earn lower abnormal returns in general, indicating that short-sale constraints do not support stock prices only in periods of financial crisis. Our results, using bid-ask spread and intra-day volatility indicate that short-sale constraints lead to reduced market liquidity during both periods of financial crisis and pre-financial crisis. This supports the hypothesis that short-selling constraints prevent pessimistic investors from trading on the stocks, which lead to lower trading volume and liquidity. BUSINESS 2013-04-05T06:54:50Z 2013-04-05T06:54:50Z 2013 2013 Final Year Project (FYP) http://hdl.handle.net/10356/51589 en Nanyang Technological University 48 p. application/pdf
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic DRNTU::Business
spellingShingle DRNTU::Business
Xie, Alicia Xinrong
Huang, Tai Lun
Lim, Wei Qin
Effects of short-selling regulations on overpricing and liquidity in the Malaysian stock market
description This report investigates the effects of short-selling regulations in the Malaysian equity market on market liquidity and overpricing. Our results indicate that during a financial crisis, short-sale constraints will not support stock prices, and instead lead to lower abnormal returns. This disproves our hypothesis that short-sale constraints lead to stock overpricing during a financial crisis. However, shortable stocks earn lower abnormal returns in general, indicating that short-sale constraints do not support stock prices only in periods of financial crisis. Our results, using bid-ask spread and intra-day volatility indicate that short-sale constraints lead to reduced market liquidity during both periods of financial crisis and pre-financial crisis. This supports the hypothesis that short-selling constraints prevent pessimistic investors from trading on the stocks, which lead to lower trading volume and liquidity.
author2 Lau Sie Ting
author_facet Lau Sie Ting
Xie, Alicia Xinrong
Huang, Tai Lun
Lim, Wei Qin
format Final Year Project
author Xie, Alicia Xinrong
Huang, Tai Lun
Lim, Wei Qin
author_sort Xie, Alicia Xinrong
title Effects of short-selling regulations on overpricing and liquidity in the Malaysian stock market
title_short Effects of short-selling regulations on overpricing and liquidity in the Malaysian stock market
title_full Effects of short-selling regulations on overpricing and liquidity in the Malaysian stock market
title_fullStr Effects of short-selling regulations on overpricing and liquidity in the Malaysian stock market
title_full_unstemmed Effects of short-selling regulations on overpricing and liquidity in the Malaysian stock market
title_sort effects of short-selling regulations on overpricing and liquidity in the malaysian stock market
publishDate 2013
url http://hdl.handle.net/10356/51589
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