Short selling involves selling a borrowed asset with the expectation that its price will decline, allowing it to be bought back at a lower price and returned to the lender. This strategy can be used to profit from falling asset prices, making it a potentially lucrative opportunity in bear markets or when specific companies or industries are expected to underperform.
Short selling has been practiced for centuries, with notable examples including the Bank of England in the 18th century and Jesse Livermore during the Great Depression. Short sellers played a significant role in the 2008 financial crisis by betting against subprime mortgages, and more recently, in the downfall of companies like Tesla and Herbalife.