Duan, Ying; Hu, Gang; McLean, R. David - In: Journal of Financial Intermediation 19 (2010) 4, pp. 564-579
Previous studies have shown that high short interest stocks have low subsequent returns. We test whether the persistence of this effect is due to costs limiting arbitrage. The arbitrage cost that we focus on is idiosyncratic risk which, regardless of the arbitrageur's level of diversification,...