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Working Paper

Short Selling and Bank Deposit Flows

Some observers have argued that the short selling of bank stock contributes to bank runs and bank failures. Previously, no evidence has been available. We find no evidence that more short selling of bank stock is associated with materially larger outflows of bank deposits. We believe this means that proposals to restrict the short selling of bank stock should be supported by other arguments.

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.


Suggested Citation

Carey, Mark, and Christopher Healy. 2024. “Short Selling and Bank Deposit Flows.” Federal Reserve Bank of Cleveland, Working Paper No. 24-05. https://doi.org/10.26509/frbc-wp-202405