Finance Seminar with Hong Liu, Washington University St. Louis

Upcoming Finance Seminar with Hong Liu, Washington University St. Louis: Short-sale Constraints, Bid-Ask Spreads, and Information Acquisition

Tuesday, November 19, 2013 - 11:00 to 12:15

The Department of Finance is proud to announce the upcoming seminar with Hong Liu, Olin Business School, Washington University in St. Louis

Hong Liu will present:

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Authors:

Hong Liu, Olin Business School, Washington University in St. Louis and CAFR
Yajun Wang, Robert H. Smith School of Business, University of Maryland

Abstract:

Short-sale constraints are prevalent in many financial markets and have been activelyÌýadjusted by regulators to tackle various problems in markets. However, theories ofÌýthe impact of short-sale constraints on market liquidity and information quality areÌýlargely absent. In this paper, we extend Liu and Wang (2013) to study this impactÌýin the presence of information asymmetry, inventory risk, and imperfect competitionÌýamong market makers. In contrast to Diamond and Verrecchia (1987), we show thatÌýshortsale ban decreases bid price, increases ask price, implying an increase in bid-askÌýspread. In addition, short-sale constraints increase the volatility of bid-ask spreads.ÌýThe presence of asymmetry information can further magnify the adverse impact ofÌýshort-sale constraints on market liquidity. On the other hand, the presence of shortsaleÌýconstraints may increase investors’ incentive to produce more precise informationÌýand thus improve aggregate information quality.

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Location:

Solbjerg Plads 3, 2000 Frederiksberg
SP212

The page was last edited by: Department of Finance // 07/20/2018