Date of Award
5-2015
Degree Type
Thesis
Degree Name
Master of Science (MS)
Department
Economics and Finance
Committee Chair(s)
Tyler Brough
Committee
Tyler Brough
Committee
Ben Blau
Committee
Ryan Whitby
Abstract
This paper examines the effects of short sale deregulation on market quality by examining the implementation of regulation SHO, which removed the uptick rule for a subset of pilot securities. This created an exogenous event, allowing a direct examination of the effect of short sale constraints on the markets. This study builds on Roll and Subrahmanyam (2010) in examining the skewness of bid-ask spreads as they represent information asymmetry and market maker competition. We find that the price tests conducted in regulation SHO evenly effected both pilot and non-pilot securities, including a widening of bid-ask spreads and a decrease in spread skewness. These findings suggest that short sellers are shifting from liquidity demanders in the market to liquidity providers in the markets. This change is associated with positive effects in the price discovery process and overall market quality.
Recommended Citation
Montgomery, Spencer A., "Frictions, the Flow of Information, and the Distribution of Liquidity" (2015). All Graduate Plan B and other Reports, Spring 1920 to Spring 2023. 544.
https://digitalcommons.usu.edu/gradreports/544
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