Essays on short selling bans and sustainable finance

<p dir="ltr">This thesis encompasses a comprehensive examination of three significant factors that have a substantial effect on contemporary financial markets: the implementation of bans on short selling, the significance of environmental, social and governance (ESG) indicators, and the prospective performance of mutual funds focused on Socially Responsible Investing (SRI). This study investigates the effect of the short selling bans implemented in six European nations (Austria, Belgium, France, Greece, Italy and Spain) during March 2020, when the COVID-19 pandemic emerged. The study’s main argument posits that, contrary to the prevailing consensus, the implementation of short selling bans during a health crisis can have stabilizing effects on markets, challenging traditional views on regulatory responses to crisis. The study also investigates the emerging area of ESG ratings and their implications in the context of market shocks. A comprehensive empirical examination clarifies the complex relationship between ESG ratings and key metrics of market efficiency, including liquidity, price discovery and information efficiency. The results support the importance of ESG criteria, not only as a means of ethical evaluation but also as a potential mechanism to mitigate risks. Finally, the analysis shifts to focus on SRI mutual funds, with the initial objective of assessing the potential for return outperformance (i.e., alpha) of these investment vehicles. The empirical analysis presented in this study challenges the assumptions that SRI funds should be expected to outperform conventional funds. This thesis presents a counterargument to the prevalent research consensus on the adverse effects of short selling bans, and the role of ESG ratings, specifically in the context of pandemics. The study also shows that the inclusion of SRI does not significantly affect financial performance compared to a wider range of investment alternatives. The empirical results presented here establish a framework for future academic discourse, facilitating a more comprehensive and nuanced understanding of financial markets, ethical investments and regulatory influences. </p>