When the ratio of the number of shares of a stock sold short divided by the total number of shares outstanding is 3 percent or higher, this suggests a large amount of short positions in the market, which implies that a relatively large number of investors expect the stock's price to decline.

Question

Quizplus · Accepted Answer

A short interest ratio of 3 percent or higher indicates a significant number of investors are betting against the stock, expecting its price to fall, which is why they have sold the stock short.

When the Ratio of the Number of Shares of a Stock