Did the 2008-2009 short-selling restrictions in Australia reduce the level of speculative trading in Australian equity markets?

Abstract

We find that there is significant speculative trading in Australian financial stocks, particularly in real estate stocks and in the consumer goods and oil and gas industries over the period from 1st January 2008 to 29th July 2009. Part of this period coincides with a period of short-selling restrictions imposed by the Australian Securities and Investments Commission (ASIC). We find these restrictions decreased speculative trading in many basic materials stocks and in many financial stocks and industrial stocks. However, speculative trading also increased in some financial stocks during these short-selling restrictions. Overall these short selling restrictions seemed to have the desired effect of reducing speculative trading in financial stocks, in particular.