Wednesday, 28 January 2009

Short selling

Can some economist please explain how betting on an event alters the outcome of that event?


Anonymous said...

Could it be like Quantum Physics, whereby measuring the position of a subatomic particle actually alters the postion of that particle?

zedman said...

Now that is a brilliant question that I have never heard anyone ask about short selling before. The nay-sayers will tell you that the short sellers create a self-fulfilling prophecy by driving down the shares of companies to levels that are unwarranted. Of course, that doesn't explain why UK bank shares kept going down during the short selling ban. The nay-sayers avoid that issue.
Well done!