An increase in the short interest ratio is interpreted by contrarians as being:
A) bullish as shares need to be repurchased to close out the short sale.
B) bearish as a large volume of buying has already taken place.
C) neutral since the selling and buying cancel each other out.
D) an opportunity for arbitrage in the market.

Question

Quizplus · Accepted Answer

An increase in the short interest ratio indicates that more shares are being shorted. Contrarians interpret this as bullish because eventually, those short positions must be covered by repurchasing shares, potentially driving the price up.

An Increase in the Short Interest Ratio Is Interpreted by Contrarians