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> In 2007, a comprehensive study of markets around the world found that ones where short selling was legal and common were more efficient than ones where it was
by cwyers 8y ago
> In 2007, a comprehensive study of markets around the world found that ones where short selling was legal and common were more efficient than ones where it was not. And a 2012 study concluded simply, “Stock prices are more accurate when short sellers are more active.”
https://www.newyorker.com/magazine/2015/03/23/in-praise-of-short-sellers https://www.newyorker.com/magazine/2015/03/23/in-praise-of-s...
Short selling is a _good thing_. Blaming the short sellers is the practices of companies like Enron, AIG and Lehman. Elon is not covering himself in glory here.
- sunstone 8y agoPointing out that short sellers have an incentive to meddle with a company's performance is definitely fair play. Sure short selling by itself is not harmful for overall market performance but, generally, it's a lot easier for third party to affect a company's downside than their upside. That's just a fact of life.
- GreenPlastic 8y agoAgreed. In many cases, short sellers do a better job of identifying, researching, and flagging illegal behavior than government agencies charged with enforcing the rules.
- mmjaa 8y agoIts also true of long investors: they also do a better job of identifying, researching and flagging top-performing companies than government agencies charged with the task. The key thing is, motivation. Both long and short investors have motivations to cull the herd.
- erikb 8y agoI'd argue neither side is "good". It's good that we have both opposing sides. Both can be exploited for bad, but each time it happens there is an opportunity for the other side to gain something. And a smart investor certainly keeps open eyes for both directions.