Dood, What Happened to My Shorts? from Kim Zussman

October 3, 2008 |

1. Has the behaviour of XLF changed since the SEC restricted shorting of certain financial stocks?

First compare daily return SPY for the period before and after the shorting ban (after=S):

SPY down for both periods, difference N.S. Now the same for XLF:

Again the difference was N.S. Like SPY, XLF was down in the pre-short ban period, but unlike SPY it went up post.

2. What about correlation with VIX? (First the control group)

Here is regression of daily change VIX vs SPY for the 11 days before the ban on shorting:

And the same since the change:

R^2 the same at 87%.

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