If you want to know where the stock market is going, follow the short sellers. That’s the advice from Olin researchers based on their research into the patterns of short sellers and market cycles. The new index they have devised currently predicts that 12 months from now, US stock prices will be higher. Marketwatch columnist Mark Hulbert talks to Olin assistant professor of finance, Matthew Ringgenberg about the short seller index:
The index that he and his co-authors came up with measures the extent to which any given month’s short-selling volume is above or below trend. It’s this index that they found to have a superior track record forecasting the stock market’s returns over the subsequent 12 months.
The index is based on research by Matthew Ringgenberg and Guofu Zhou, professors at Olin Business School and David Rapach, St. Louis University, Cook School of Business. Professor Ringgenberg discusses the research and index in video, click below to watch.
