How to make money from falling share prices

With shares in Northern Rock plummenting, hedge funds have made a fortune from the falling price by 'shorting' their shares. So how did they do it and can you do the same?

So far the main losers from the turmoil that has engulfed Northern Rock are not its account holders, but its shareholders, who have seen the share price fall from a peak of £12 to just over £3. But one group of investors, mainly hedge funds, has made a fortune from the bank's plummeting stock price by "shorting" its shares. So how did they do it and can you do the same?

Selling shares you don't own

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.