Can limits to arbitrage explain historical asset price reversals? During the "British Bicycle Mania" of 1896-1898, cycle share prices rose by 200 per cent before falling 76 per cent from their peak value. This paper argues that arbitrage during this episode was limited by the risk of being...

This paper shows that future risk-adjusted returns relate inversely with current short interest, current skewness, and the interaction between current short interest and current skewness. However, these relations vanish during the NASDAQ bubble, suggesting that synchronization risk (Abreu and...

The authors propose a strategy that utilizes trading information of both short sellers and corporate insiders. They find that the strategy earns statistically significant and economically meaningful risk-adjusted returns for at least one year, which stems mainly from the information asymmetry...

We provide evidence on short sellers' exploitation of temporary mispricing in the equity market. Using a mispricing indicator that measures deviations from a stock 's fundamental value, we find higher levels of short selling for temporarily overvalued stocks. The result is robust to controlling...