We introduce an evolutionary equilibrium asset pricing model with heterogeneous agents who can either act as brokers or hedge funds. Hedge funds can trade on margin, taking short or (leveraged) long positions in the assets. Brokers provide asset loans and credit to margin traders. In any...

In this letter, I exploit the high fraction of retail investors in the early years of the Bitcoin and the introduction of margin trading and short selling by the Bitcoin Exchange Kraken to apply a difference-in-differences approach with four other comparable Bitcoin exchanges to infer causality....

We examine the relation between the monthly reported short interest (the number of shares that are in outstanding short positions) and short selling. We aggregate transaction level short selling into monthly short turnover (a measure of the shorting flow) and find that short turnover and short...

This paper examines the impact of naked short selling on equity markets where it is restricted to securities on an approved list. Consistent with Miller's (1977) intuition, stocks with the highest dispersion of opinions and short sale constraints are the only stocks to exhibit significant and...

We provide novel evidence that arbitrageurs use exchange-traded funds (ETFs) as an avenue to circumvent short-sale constraints at the stock level. Using a large sample of U.S. equity ETF holdings, we document that shorting activity on ETFs rises with the difficulty of shorting the underlying...

Short selling is of great interest to investors because this activity has predictive value for future stock returns. We investigate whether this extends to foreign stock ETFs. In contrast to regular stocks, ETFs with high short interest experience positive abnormal returns. Our analysis suggests...

Short sellers are routinely blamed for destabilizing stock markets by exacerbating deviations from fundamental values. In response, regulators periodically impose short sale constraints aimed at preventing excessive stock market declines. One explanation is that policy makers regard short...

We find that Robinhood ownership changes are unrelated with future returns, suggesting that zero-commission investors behave as noise traders. We exploit Robinhood platform outages to identify the causal effects of commission-free traders on financial markets. Exogenous negative shocks to...

The literature on short selling restrictions focuses mainly on a ban's impact on market efficiency, liquidity and overpricing. Surprisingly, little is known about the effects of short selling restrictions on institutional investors' trading behavior.Since institutional investors dominate mature...

We examine the economic determinants of short-sale supply, and its consequences for future stock returns. Lendable supply increases with expected borrowing costs and decreases with financial statement constructs that indicate overvaluation. Although rising loan fees help ease supply, we find...