Okay. Fair enough but I still disagree.
From an AFR article I remember rading recently.
A number of studies after the 2008 financial crisis to analyse the effectiveness of banning short selling concluded it had little effect on prices but did reduce market efficiency. For example, in 2011, the Federal Reserve Bank of New York concluded that “banning short selling does not appear to prevent stock prices from falling”, but instead “lowered market liquidity and increased trading costs”. The European Systematic Risk Board reached similar conclusions.
Indeed, in an interview at the end of 2008, when the then-chairman of the US Securities Exchange Commission was asked about the success of its short selling ban, he said: “Knowing what we know now, I believe on balance the commission would not do it again.”
In a sophisticated stock market like Australia’s, short selling plays a critical role for many funds that hedge their risk. For example, a “market neutral” fund aims to drastically reduce the volatility of its returns by pairing long positions against short positions; and “long-short” funds will use short selling to either protect investors’ capital and/or increase returns.Funds such as these can produce terrific results for their investors, which include mums and dads and SMSFs. For example, one of Australia’s leading long-short funds has a record, over the long-term, of not participating in market falls but capturing all the market rises.
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