We examine the market’s reaction around a series of events on the Kuala Lumpur Stock Exchange (KLSE) where the Malaysian government removed short selling restrictions on selected stocks and then subsequently reimposed these restrictions. These events provide a unique opportunity to analyse the effects of short selling restrictions on the price formation process in an emerging market. We find evidence consistent with the explanation that the removal of short selling restrictions results in more complete markets and is valued by market participants, particularly for actively traded stocks.  Source: Applied Financial Economics, 2006, 16, 385–393. Authors:Lamba, Asjeet S. Mohamed Ariff.