A Model for Estimating Short Interest

Detta är en Kandidat-uppsats från KTH/Matematisk statistik

Sammanfattning: The hefty price increases in heavily shorted stocks in the beginning of 2021 indicates that short interest might be an underrated yet important key figure for investors when deciding on whether to take on an investment strategy or not. Most stock exchanges release information regarding the short interest only once a month leaving investors having to make decisions on outdated information. No previous research was found on whether there exists a linear relationship between some variables to estimate the short interest. Through the collection of mostly financial data and some regression analysis, a large­sample linear regression model was constructed. Although the problem complexity may seem of higher degree than linear, this study suggest that there exists a linear relationship between the variables studied when estimating short interest. These results suggest that one can use the mathematical model presented in this study for estimation and also get a better understanding of which underlying variables that impact short interest the most. The final model consisted of 6 variables, number of outstanding shares, average trading volume, stock price, volatility, equity andaverage weighted cost of capital.

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