Excerpt from the Irish Times:

Stocktake: More volatility lies ahead for investors

Tue, Sep 3, 2019

Proinsias O'Mahony

Read the full article here: https://www.irishtimes.com/business/personal-finance/stocktake-more-volatility-lies-ahead-for-investors-1.4005079

Short-sellers “should be knighted, not spited”

Short sellers aren’t a popular bunch. Shorts make money from falling stock prices, something many critics find to be disagreeable. The critics should think again, however – according to a new study, short sellers are informed investors who make markets more efficient. The study, Best Short, finds high-conviction short bets – large positions relative to the size of a manager’s portfolio – greatly outperform short-conviction bets. In other words, when a hedge fund bets big against a particular stock, there’s a fair chance they have a good reason for doing so.

The researchers point to Carillion, the British construction giant which collapsed in January 2018, noting short bets against the company started increasing as early as March 2015.

They also note that Europe is unlike the US in that shorts are obliged to publicly disclose short positions once they reach a certain size. That effectively works as a constraint upon short-selling activity – many funds ensure their short positions don’t cross the regulatory threshold. Commenting on the study and on the European regulations, Albert Bridge Capital founder Drew Dickson tweets that this ultimately results in distorted pricing in Europe. “Most short sellers should be knighted”, says Dickson, “not spited”