PT  - JOURNAL ARTICLE
AU  - C.B Garcia
TI  - A Simple Model for the Study of Shorting Stocks
AID  - 10.3905/JOI.2009.18.2.062
DP  - 2009 May 31
TA  - The Journal of Investing
PG  - 62--68
VI  - 18
IP  - 2
4099  - https://pm-research.com/content/18/2/62.short
4100  - https://pm-research.com/content/18/2/62.full
AB  - Based on a simple quantitative model, arguments for and against the shorting of a stock are presented for the following issues: 1) short selling causes the stock’s market price to fall, 2) short selling adds liquidity to the stock, 3) short selling causes the stock’s expected return to rise, 4) short selling increases the stock’s volatility, 5) short selling should be allowed only in the derivatives market, 6) short selling reduces capital for new investments, and 7) short selling may cause a “depression trap” (i.e., where the stock’s market price is stuck at an extremely depressed level, despite a more than adequate number of reasonable bids).TOPICS: Quantitative methods, volatility measures, risk management