Short sale constraints, divergence of opinion and asset values: evidence from the laboratory

The overvaluation hypothesis (Miller 1977) predicts that a) stocks are overvalued in the presence of short selling restrictions and that b) the overvaluation increases in the degree of divergence of opinion. We design an
The overvaluation hypothesis (Miller 1977) predicts that a) stocks are overvalued in the presence of short selling restrictions and that b) the overvaluation increases in the degree of divergence of opinion. We design an experiment that allows us to test these predictions in the laboratory. The results indicate that prices are higher with short selling constraints, but the overvaluation does not increase in the degree of divergence of opinion. We further find that trading volume is lower and bid-ask spreads are higher when short sale restrictions are imposed. JEL Classification: C92, G14 Keywords: Overvaluation Hypothesis , Short Selling Constraints , Divergence of Opinion
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Metadaten
Author:Gerlinde Fellner, Erik Theissen
URN:urn:nbn:de:hebis:30-91482
Series (Serial Number):CFS working paper series (2011, 05)
Document Type:Working Paper
Language:English
Date of Publication (online):2011/02/14
Year of first Publication:2011
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2011/02/14
Tag:Divergence of Opinion; Overvaluation Hypothesis ; Short Selling Constraints
HeBIS PPN:233053948
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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