By the way, is there anybody on board who knows how to fly a plane?
| May 17th, 2010 | Filed under: Academic Research, Hedge Fund Regulation, Today's Post | By: Alpha Male |
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Remember that scene in the movie Airplane! when flight attendant Elaine Dickinson announces over the intercom,
“There’s no reason to become alarmed, and we hope you’ll enjoy the rest of your flight. By the way, is there anyone on board who knows how to fly a plane?”
Naturally, passengers on the ill-fated Flight 209 listened attentively to the announcement, then proceeded to totally panic.
Well, according to a recent study on the 2008 short sale bans, that’s basically what regulators did in response to the financial crisis. They tried to calm everyone down. But instead, the paper says that they inadvertently caused “markets to overreact” by removing a central player in the market equilibrium – the short-seller. This, according to a new study on the topic.
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