Graduation Year

Fall 2012

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Richard C. K. Burdekin

Reader 2

Janet K. Smith

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Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2012 James Weyerhaeuser


This study provides an empirical analysis of the 2008 short sale ban. The evidence suggests that the presence of tradable options plays a crucial role in determining the effect of a short sale ban. Results show that if there are no traded options on a stock, the short sale ban brought abnormal returns of roughly +8%. However if there are traded options on a stock, the market maker exemptions nullify the positive effects of the ban. Furthermore, for the banned stocks that do experience positive abnormal returns during the ban, the lifting of the ban causes a prompt reversal of these returns. Findings suggest short sale bans cause an underrepresentation of negative opinions for as long as the ban lasts and that the presence of tradable options eliminates that underrepresentation by providing an alternative for pessimistic investors.