History Of Short Selling
In the field of finance, short selling means selling of assets which are actually borrowed. Here the borrower intends to buy the same type of assets at a future date and returning it to them. Usually the borrowing is done from a 3rd party. |
When it comes to stocks specifically, you are trying to take advantage of the fall in stock prices through short sales. You basically borrow the stocks from a broker who gives it to you from another inventory. However, you have to return these stocks over a period of time determined by the stock broker and you. In this mean time, the price of the stock may fall or rise, and depending on that you can make a profit or suffer a loss.
However, short selling is not a new concept and even great authors like Shakespeare have mentioned it. There is reference to short selling Shakespeare's book Merchant of Venice. The concept of short selling has been around in England since the eighteenth century much to the ire of the people. It was never appreciated as a concept, and people found it rather deceiving.
The Dutch people have had the concept of short selling from the seventeenth century. There have been several popular cases in the history of short selling. One is the Bank of England and the Black Wednesday case. There was a loss of $10 billion pounds worth due to short selling.
The dot com bubble is a twentieth century example of the short sale. There are several such examples that were popular in the early 19th and 18th centuries in the United States and England.
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