Aggregate Short Interest and Market Valuations / Owen A. Lamont, Jeremy C. Stein.

Format:

Book

Author/Creator:

Lamont, Owen A.

Contributor:

National Bureau of Economic Research.

Stein, Jeremy C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10218.

NBER working paper series no. w10218

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

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.

Notes:

Print version record

January 2004.