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Beverly Chandler, Opalesque London: Frédéric Ducoulombier, Director of Executive Education, EDHEC-Risk Institute and Director, EDHEC Risk Institute–Asia comments on the proposed restrictions on trading which have been thrown up by the global financial crisis in this month’s Edhec-Risk newsletter. Ducoulombier reflects on the academic studies which have concluded that short sellers contribute positively to market efficiency. "Research that has been undertaken by Securities and markets regulators around the world introduced bans on short-selling at different stages of development of the recent crisis, purportedly to halt price falls, reduce volatility and, in the words of former chairman of the Securities and Exchange Commission Christopher Cox, 'restore equilibrium to the markets’" Ducoulombier writes.

"These hasty decisions were not only devoid of theoretical basis, but also flew in the face of empirical evidence. Academic studies, including work by EDHEC-Risk Institute researchers, had documented the positive contribution of short-sellers to market efficiency and shown that constraining short sales significantly reduced market quality – by reducing liquidity and increasing volatility – and could have unintended spillover effects."

In a series of articles published or forthcoming in leading academic journals, EDHEC Business School Professor Ekkehart Boehmer, w......................

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