Short selling of Spanish bank shares

Short selling of Spanish bank shares

Fecha: julio 2012

Autores: Ángel Berges, Daniel Suárez, A.F.I.

Etiquetas: Volatilidad, Venta de acciones, Corto plazo

Spanish and International Economic & Financial Otlook, SEFO, V. 1 N.º 2

Bank share prices have been particularly hit in recent months, especially in those countries, like Spain, where the fate of banks and that of public finances is more closely related, such that speculating against bank shares is seen as a proxy for speculation against sovereign debt. These types of transactions are especially amplified by “short sales”, which have a great potential to destabilize normal price setting in stock markets, especially in those sectors, such as the financial sector, facing strict capital requirements. This explains why several countries, among them Spain, imposed temporary bans on short selling of bank shares. In the case of Spain, the effect of that ban has been a decrease in volatility and asymmetry in price formation, while at the same time reducing considerably market liquidity.

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