Short Interest in Stocks

Short selling allows a person to profit from a falling stock. How could someone profit from a stock decreasing in value? Well, the existence of this ability to short sell a public stock should not come as a surprise as stock prices are constantly rising and falling. Thus, there are brokerage departments and market firms whose sole purpose is to research deteriorating public companies that are prime short-selling candidates. These firms pore over financial statements looking for any weaknesses that the public market may not have discounted yet or a company that is simply overvalued. One factor they look at is called short interest, which serves as a market-sentiment indicator, and we’ll cover it in detail in this article.