Short-selling explained

Following days of volatile activity, European markets rose today after France, Italy, Spain and Belgium imposed a temporary ban on the short-selling of financial shares.

Investors who participate in short-selling borrow shares from other investors and sell them at current market prices.

When the value of those shares drop, they buy them back at the new, lower price and return the shares to their original owners.

Their profit is the difference between the price they sold the shares and the price they bought them back, minus lender fees. In essence, the goal of short-selling is to profit from the falling price of a share.

Market analyst Aly-Khan Satchu explains to Al Jazeera’s Tony Harris why short-selling can cause market problems.