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Technology Stocks : Rambus (RMBS) - Eagle or Penguin -- Ignore unavailable to you. Want to Upgrade?

To: Dave B who wrote (55486)	9/27/2000 1:35:12 PM
From: GVTucker	Read Replies (1) \| Respond to of 93625

Ordinarily, short interest and stock price are directly correlated. As a stock price increases, short interest increases. As a stock price goes down, short interest goes down. There are exceptions, of course. In one notable area that has been verified by research, when a stock is heavily shorted, it is much more likely to show a poor return than a stock a stock that has a normal short interest. In these cases, often short interest does not budge for a long time as the stock price declines. The example that we're talking about is more in the anecdotal stage. I have talked to a few people that might try and do a few studies to verify what we have observed. The logic behind both of these examples would be the same, at least to me: short sellers on average do more exhaustive research than long-only stock holders. That's why in 'normal' circumstances you'd see short interest rise as the stock price rises. In our particular case, it may be that a decent number of short sellers have spotted something that increases the risk in holding a short position. This doesn't necessarily mean that the stock is definitely going up, at least to me. It does mean that the risk that the stock is going up (and going up sharply) has risen. As I type this, it sounds clear as mud to me.