Author: Margie Lindsay
Source: Hedge Funds Review | 27 Jul 2010
Categories: Hedge Funds
Topics: equity, Data Explorers, short-selling, shorting, long/short, Equity long/short
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.