| Summary: | Short sale has been mostly associated with decrease in the equity market's volatility, and increase in the equity market's liquidity, this paper examines the volatility and the liquidity of the 55 stocks that are eligible for regulated short sale (RSS) before and after the reintroduction of RSS. First, this study utilizes both the non-parametric Wilcoxon Signed Rank test, and the GARCH (1,1) model in order to analyze the impact of the reintroduction of RSS on the 55 stocks' volatility. Second, this study also utilizes the non-parametric Wilcoxon Signed Rank test and the bid-ask spread to determine whether the reintroduction of RSS has any significant impact on the 55 stocks liquidity. The results show that the volatility and the liquidity of the 55 stocks significantly increase after the reintroduction of RSS. In addition, through the GARCH (1,1) model, it was found that the market is more efficient after the reintroduction of RSS due to increase in the impact of recent news and decrease in the impact old news on the 55 stocks' volatility. (C) 2016 The Authors. Published by Elsevier B.V.
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