Short covering not driving share price - Data Explorers
20 October 2011 London
Image: Shutterstock
Though short sellers have been covering positions in the recent market upturn, it has not necessarily driven share prices higher, says Data Explorers.
By analysing the top 50 most and least shorted stocks and subsequent price movements, the analytics firm challenged the view that the surge in the S&P 500, rising 6.1 per cent since the start of October, was due to short sellers being squeezed out of positions.
"Short interest has retreated slightly in the last couple of weeks. However, this decline does not point to a short squeeze as the shares which have seen the greatest price increase actually had a below average short interest coming into the quarter and the shares which saw the greatest short covering underperformed the market," wrote Data Explorers.
By analysing the top 50 most and least shorted stocks and subsequent price movements, the analytics firm challenged the view that the surge in the S&P 500, rising 6.1 per cent since the start of October, was due to short sellers being squeezed out of positions.
"Short interest has retreated slightly in the last couple of weeks. However, this decline does not point to a short squeeze as the shares which have seen the greatest price increase actually had a below average short interest coming into the quarter and the shares which saw the greatest short covering underperformed the market," wrote Data Explorers.
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