Volume of short sales represents a contrary opinion rule, because:
A)short sellers generally do not know what they are doing.
B)short sellers tend to overreact.
C)short sales generate potential demand for stocks.
D)More than one of the above

Question

Quizplus · Accepted Answer

The contrary opinion stems from two sources: first, short sellers are sometimes emotional and may overreact to the market; second and more important, there now is a built-in demand for stocks that have been sold short by investors who will have to repurchase the shares to cover their short positions.

Volume of Short Sales Represents a Contrary Opinion Rule, Because