SPANNING WITH SHORT-SELLING RESTRICTIONS

In principle, the set of attainable payoff vectors is reduced if asset s cannot be sold short. However, we show that the original space of pa yoff vectors is spanned despite short sale restrictions if there is on e additional asset whose payoff is a positively weighted sum of the pa yoffs of the original assets. For example, this condition is automatic ally fulfilled if the original assets are stocks and the additional as set is an index future consisting of these stocks.