For hedge fund managers, too, short selling is more difficult than mere buying. A stock price, for instance, has a theoretical bottom line, and buying would be simply justified when the price is close to it, whereas overvalued instruments could go any higher as a bubble occurs.  Roughly saying, you may predict, “it wouldn’t go lower than that”, although it’s much harder to say, “it wouldn’t go higher than that”.

Then, how can we short sell if it’s difficult to predict the peak of the bubble? This article explains what institutional investors consider in this kind of situation. Continue reading A hedge fund manager explains how to short sell →