Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2013-11-15
Number: 13-186/IV/DSF68
Author-Name: Amelia Pais
Author-Workplace-Name: Massey University, College of Business, School of Economics and Finance, Auckland, New Zealand
Author-Name: Philip A. Stork
Author-Workplace-Name: VU University Amsterdam, and Duisenberg School of Finance
Title: Short-Selling, Leverage and Systemic Risk
Abstract: During the Global Financial Crisis, regulators imposed short-selling bans to protect financial institutions. The rationale behind the bans was that “bear raids”, driven by short-sellers, would increase the individual and systemic risk of financial institutions, especially for institutions with high leverage. This study uses Extreme Value Theory to estimate the effect of short-selling on financial institutions’ individual and systemic risks in France, Italy and Spain; it also analyses the relationship between financial institutions’ leverage and short-selling. The results show that short-sellers appear to specifically target institutions with lower capital levels. Furthermore, institutions’ risk-levels and changes in short-selling positions tend to move in tandem.
Classification-JEL: C14, G01, G15, G21
Keywords: bear raids, short-selling bans, financial institutions’ risk, systemic risk, leverage capital requirements, Extreme Value Theory
File-Url: https://papers.tinbergen.nl/13186.pdf
File-Format: application/pdf
File-Size: 439752 bytes
Handle: RePEc:tin:wpaper:20130186