Aggregate Short Interest and Market Valuations
We examine some basic data on the evolution of aggregate short interest, both during the dot-com era, and at other times in history. Total short interest moves in a countercyclical fashion. For example, short interest in NASDAQ stocks actually declines as the NASDAQ index approaches its peak. Moreover, this decline does not seem to reflect a substitution away from outright short-selling and towards put options, as the ratio of put-to-call volume displays the same countercyclical tendency. The evidence suggests that: i) arbitrageurs are reluctant to bet against aggregate mispricings; and ii) short-selling does not play a particularly helpful role in stabilizing the overall stock market.
|Date of creation:||Jan 2004|
|Publication status:||published as Lamont, Owen A. and Jeremy C. Stein. "Aggregate Short Interest And Market Valuations," American Economic Review, 2004, v94(2,May), 29-32.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Owen A. Lamont & Richard H. Thaler, 2003.
"Can the Market Add and Subtract? Mispricing in Tech Stock Carve-outs,"
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- Owen A. Lamont & Richard H. Thaler, "undated". "Can the Market Add and Subtract? Mispricing in Tech Stock Carve-outs," CRSP working papers 528, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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