Objective research to aid investing decisions

Value Investing Strategy (Strategy Overview)

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Allocations for June 2022 (Final)
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Short Selling

Are there reliable paths to success in short selling? Is short selling activity a useful indicator for investors/traders? Does it mean “stay away” or “squeeze coming?” These blog entries cover the short side of the market.

What Makes Shorts Throw in the Towel?

In their February 2005 paper entitled “Holding on to Your Shorts: When do Short Sellers Retreat?”, Pavel Savor and Mario Gamboa-Cavazos examine NASDAQ trades during the period June 1988 through August 2001 to determine the circumstances in which short sellers choose to increase their common stock positions and those in which they choose to cover. They focus on stocks unlikely to have unusual short sale constraints.The authors find that: Keep Reading

Short Kiss of Death?

In his January 2005 paper on “Constrained Short Selling and the Probability of Informed Trade”, Tyler Henry explores the relationship between private information and the returns on stocks with high short interest. He finds that: Keep Reading

Short Selling Shocks Stocks

In their February 2005 paper entitled “The Link Between Short Sale Constraints and Stock Prices”, Lauren Cohen, Karl Diether and Christopher Malloy isolate supply and demand shifts in equity lending to examine shorting demand as an indicator, and cause, of future stock returns. Using actual share loan prices and quantities from a large institutional investor during August 1999 to July 2003, they find that: Keep Reading

Buffering Exuberance

In their December 2003 paper on “Aggregate Short Interest and Market Valuations” Owen Lamont and Jeremy Stein examine the countercyclical nature of aggregate short interest and the aggregate put/call option ratio. They note that, for individual stocks, demand for shorting correlates with abnormally low future returns. However, for stocks in aggregate, they conclude that: Keep Reading

Are Short Sellers Smarter Than the Average Bear?

Should investors avoid stock with a high short interest? In their March 2004 paper entitled “Short Interest and Stock Returns”, Paul Asquith, Parag A. Pathak and Jay R. Ritter examine short selling trends and test the performance of stocks with high levels of short interest. Using data covering the period 7/88-12/02 for NYSE-AMEX-NASDAQ firms and 2/76-12/02 for NYSE-AMEX firms only, they find that: Keep Reading

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