Today’s Connors Research Traders Journal is going to look at potential profitable opportunities in shorting stocks. These opportunities are backed by academic studies which show large edges in shorting lottery stocks.
Lottery stocks are stocks where traders and investors believe can provide them with large short- term payoffs. Walk by any store that sells lottery tickets and you’ll see the overall success of people who buy lottery tickets. That same behavioral concept has been applied to speculative investing and you can read about it here as follows:
1. Start with this great article, “Investors Love Lottery Stocks”, which summarizes the shorting opportunities along with the academic studies that provide the research. http://thebamalliance.com/blog/investors-love-lottery-stocks/
2. Follow it up with this less well-known academic study which further confirms the edges – “Short Interest and Lottery Tickets” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3006067
I hope you enjoyed this issue of the Connors Research Traders Journal.
Enjoy your trading!
Larry Connors
Connors Research LLC