SHORT SELLING PROHIBITION AND ITS IMPACT ON PORTFOLIO SELECTION CASE STUDY: TEHRAN STOCK EXCHANGE

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BEHRADMEHR N.; JABAL AMELI F.; SHEYBANIFAR S.

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Paper Information

Journal: Journal of Economic Research and Policies Year:2016 | Volume:23 | Issue:76 Page(s): 187-208

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Title

SHORT SELLING PROHIBITION AND ITS IMPACT ON PORTFOLIO SELECTION CASE STUDY: TEHRAN STOCK EXCHANGE

Author(s)

BEHRADMEHR N. | JABAL AMELI F. | SHEYBANIFAR S. | Issue Writer Certificate

Keywords

PORTFOLIOQ2

MARKOWITZ’S MEANQ2

VARIANCE THEORYQ2

WEIGHT CONSTRAINTSQ2

KUHNQ2

TUCKERQ2

RISKQ2

FREE ASSETQ2

Abstract

In this paper, we investigate short selling prohibition impacts upon the PORTFOLIO optimization using mean variance PORTFOLIO theory in Tehran Stock Exchange (TSE). KUHN-Tucker approach is applied for imposing the non-negativity WEIGHT CONSTRAINTS which means no short selling. In other words, we impose the non-negativity constraint deduced from the KUHN-Tucker approach to simulate the no short selling rule in this market. We also apply conditional estimation of the mean and variance of returns (resulted from GARCH model) along with the simple one to understand the effects of weight estimation. Comparing Sharp ratios, we observed that regardless of the psychological characteristics of the investor, short selling prohibition results in RISK-free assetholding and higher return (we will be better off without short selling in this market. Holding the RISK-free asset is almost the optimal choice in this case). World experience shows that short selling prohibition does not result in price stability in financial crisis. In other hands, short selling, in its common form, does not seem to be an appropriate tool due to newly founded situation of TSE. Henceforth, stock market development seems to be an appropriate policy and short selling can be used in TSE after being tailored with IRAN’s judicial situation.

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APA: Copy

BEHRADMEHR, N., JABAL AMELI, F., & SHEYBANIFAR, S.. (2016). SHORT SELLING PROHIBITION AND ITS IMPACT ON PORTFOLIO SELECTION CASE STUDY: TEHRAN STOCK EXCHANGE. JOURNAL OF ECONOMIC RESEARCH AND POLICIES, 23(76), 187-208. SID. https://sid.ir/paper/89523/en

Vancouver: Copy

BEHRADMEHR N., JABAL AMELI F., SHEYBANIFAR S.. SHORT SELLING PROHIBITION AND ITS IMPACT ON PORTFOLIO SELECTION CASE STUDY: TEHRAN STOCK EXCHANGE. JOURNAL OF ECONOMIC RESEARCH AND POLICIES[Internet]. 2016;23(76):187-208. Available from: https://sid.ir/paper/89523/en

IEEE: Copy

N. BEHRADMEHR, F. JABAL AMELI, and S. SHEYBANIFAR, “SHORT SELLING PROHIBITION AND ITS IMPACT ON PORTFOLIO SELECTION CASE STUDY: TEHRAN STOCK EXCHANGE,” JOURNAL OF ECONOMIC RESEARCH AND POLICIES, vol. 23, no. 76, pp. 187–208, 2016, [Online]. Available: https://sid.ir/paper/89523/en

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