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Behavioural Finance
Herding
Definition
The tendency of investors to follow the crowd rather than independent analysis. Herding amplifies trends and inflates bubbles, which contrarian short sellers seek to fade.
Related Terms
FOMO
Fear of missing out — the behavioural bias driving investors to chase rising prices. FOMO buying into a heavily-shorted stock can ignite a short squeeze as price-insensitive shorts get forced out.
Contrarian
An investment style that bets against prevailing sentiment. Short selling overvalued momentum names is a classic contrarian position.
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