Long Short Ratio exposes global decline in negative sentiment |
Date: Thursday, July 29, 2010
Author: Margie Lindsay, Hedge Funds Review
The recently launched Long Short Ratio from Data Explorers is at a two-year high, indicating short sellers are now taking money off the table, according to Will Duff Gordon.
The Long Short Ratio is a set of analytics enabling fund managers to track
bearish sentiment in assets of interest and is available in the Data Explorers
excel toolkit. Data Explorers is a global provider of securities financing data
and daily long and short institutional fund flow information.
The Long Short Ratio drops when short-sellers are adding to positions and rises when they take profits and exit positions. Recent declines in short interest across global equities reveals a continuing decline in bearish sentiment.
The long short ratio for global equities stands at a two-year high of 9.5
from a short-term low of just under eight in April. Over the past two years, it
has risen from a low of 5.75 (in September 2008).
Equity short-selling is significantly below the levels of two years ago and, at
just over $630 billion, is short of April 2008’s peak of $800 billion. This
coincided with the peak in global equities.
The Data Explorers Long Short Ratio is constructed by dividing the total value
of lendable assets by the value of those on loan. Looking at a time series of
this ratio gives an insight into whether the market is becoming more long or
short over time.
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