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The Informational Effects of Restrictions on Short Sales: Some Empirical Evidence

Published online by Cambridge University Press:  06 April 2009

Stephen Figlewski
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Extract

In a world of heterogeneous investors, a competitive financial market has two major functions. First, it is the mechanism by which ownership of the existing supply of risky assets is distributed among investors. This is the role which is analyzed in detail by the standard Capital Asset Pricing Model (CAPM) and its many extensions. The second important market function is to aggregate the diverse information held by different investors into a single price. Most versions of the CAPM eliminate the information aggregation function by assuming that investors hold homogeneous beliefs with respect to the probability distribution of asset returns. Exceptions which deal with some aspects of the problem are Lintner [7], Grossman [4], Grossman and Stiglitz [5], and Figlewski [1, 3 ].

Type
Information and Asset Values
Information
Journal of Financial and Quantitative Analysis , Volume 16 , Issue 4 , November 1981 , pp. 463 - 476
Copyright
Copyright © School of Business Administration, University of Washington 1981

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References

REFERENCES

[1]Figlewski, S. “Market ‘Efficiency’ in a Market with Heterogeneous Information.” Journal of Political Economy, Vol. 86 (08 1978), pp. 581–597.CrossRefGoogle Scholar
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