Short-sale constraints and short-selling strategies: the case of SEC's revocation of the uptick rule in 2007

The US Securities and Exchange Commission (SEC) revoked the uptick rule in July 2007. The revocation of the uptick rule provides us with a unique setting to investigate the impact of short-sale constraints on various short-selling strategies in a controlled environment. It shows that contrarian short selling and voluntary-liquidity short selling are more profound in uptick-rule-restricted stocks than in unrestricted stock. Market trend chasing short selling is less profound in restricted stocks than in unrestricted stocks. No evidence shows that the uptick rule has material impact on risk-bearing short-selling strategies.