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To: Tommaso who wrote (202025)	11/4/2002 11:17:16 AM
From: GraceZ	Respond to of 436258

The whole process adds a lot of volatility that has little to do with anyone's perception of actual values. I think short term trading on the whole does this because it walks values further away from fundamental value, not necessarily just short selling. I like to think short selling reduces volatility simply because short sellers tend to sell near in a situation where there might not be near long sellers. In the absence of near selling by either longs or shorts, supply has to come from the MM selling naked which is always further away. Unhedged shorts who do not have deep enough pockets to ride out a rally are forced to subsidize it as their margin calls compel them to cover. Yup. Employing margin long does this as well on the downside.