What’s the purpose that benefits the whole of the economy? I don’t understand it’s purpose other than to bet on a losing stock. Is it purely for hoping a business will fail? Where is the benefit outside of the individual shorting? The idea of shorting a stock seems unmoral and unethical. Basically why is shorting even allowed to be a thing?
In: Economics
A lot of people hit the nail on the head with fundamental valuation tool description, but it also serves another important function.
There are huge companies that make their money by “making the market”. They provide bids and offers for a stock within a very tight range. They don’t always have stock on hand to sell to buyers, so the ability to short the stock allows them to keep markets liquid, even when they may not have shares on their book.
This also benefits the people lending their shares out to short-sellers, as they collect a yield from the person borrowing their shares.
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