Time-Varying Effect of Short Selling on Market Volatility During Crisis: Evidence from COVID-19 and War in Ukraine

In this paper, we empirically investigate the effect of short selling on market volatility during exogenously-induced uncertainties. Using Covid-19 pandemic and onset Russian-Ukraine Conflicts periods as event study, employ asymmetric EGARCH model. We show high persistence effects pre-covid outbreak and post-covid periods. find evidence that increases during period while conflict is characterized by reduced volatility. no period. Our findings provide significant implications for short-selling strategies crisis