The Chinese stock market has suffered serious declines in recent weeks and some observers are referring to the situation as a slow-motion crash. As can be seen in the video linked below, the Chinese government has vowed to respond with a number of measures designed to support the market. Among those measures would be restrictions on “short selling” similar to those put in place in the U.S. stock market during the subprime crisis of 2007-09. What do regulators hope to accomplish by banning short selling? Do you think such measures are effective? Do you think that short selling serves a legitimate use within markets? Finally, why do you think markets crash? If we expect them to occur, how can we protect ourselves as investors?
