Short selling is a trading strategy where an investor sells borrowed securities, expecting the price to decline, and then repurchases them at a lower price.
Why is Option B Correct?
Short sellers borrow shares, sell them at the current price, and later buy them back at a lower price to return to the lender, profiting from the price difference.
APT assumes investors can sell short to exploit mispricings in multiple risk factors.
Why Not Other Options?
A (Not selling the whole shareholding) → Short selling does not involve owning shares.
C (Selling & buying back shortly after) → Describes day trading, not short selling.
D (Selling many securities quickly) → Short selling is not about trading speed, but betting on price declines.
???? Reference: CFA Institute (Arbitrage Pricing Theory), CISI Wealth & Investment Management.
Contribute your Thoughts:
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit