Four seasons,
When you are short-selling, while you are indeed selling something you don't own (as you point out), the point is that you are selling something SOMEONE ELSE owns. And that someone has agreed that you can sell it (or do whatever you want with it) because you have committed to giving it back to them, at a time of either your election, or theirs.
So t's not like you are selling something that NO ONE owns. Someone has title to it. They are just "renting" it to you on the understanding that you are selling it to a third party but that you will at some stage buy it back and return it to its rightful owner.
the reason that tactile assets such as land and cars don't get short sold like stocks do is because they are non-securitised assets. In other words, stocks represent a securitised claim over future profits (and losses) in the listed enterprise and it is that claim that is traded when a stock is bought or sold. But when you own a house or a car, you own the asset outright and not just a security representing a claim over those assets.
but the other reason stocks are are short sold (and also have a variety of derivative contracts written over them) is that they are far more liquid and homogenous assets compared to stocks.
by the way, it's not just stocks that are subject to shorting. Other asset classes such as commodities, index futures and currencies (and all their various derivatives) are also subject to short-selling.
Finally, you say that mum and dad logic does not apply in financial markets. I assume you, like most individuals in Australia, have managed super funds. If you do, then you are highly likely to be an unwitting participant (and beneficiary) of the practice of short-selling because your super fund is highly likely to be lending stock it owns on your behalf out to loan pools for shorting, and in the process generating additional portfolio performance for you!
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