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Finance Glossary

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Over 700 finance terms, Shmooped to perfection.

Short Interest Theory

Definition:

This investing theory states that stocks with lots of investors betting that the stock will go down will actually go the other direction.

When a stock sees lots of short sales—where people sell something they borrow but don't own—any slight increase in price will cause these sellers to buy because they stand to lose money if the stock price goes up. All those buys will push the stock price up.

That's the theory, anyway.