Disagreement about stock valuation, combined with short-sales constraints, can increase asset prices. We build a model showing that, so long as investor beliefs are not perfectly correlated, investors will disagree less about the value of a conglomerate than about each of its individual...

This paper studies the spot and futures cross-market efficiency implications of the regulatory short-selling constraints imposed during the 2008-2009 financial crisis. We find the equilibrium position for the basis during the ban is below that normally seen, with the spot price higher relative...

This study examines the effect of short selling constraints on politically motivated suppression of negative information. We use a unique setting in China, in which there are multiple exogenous changes in short selling constraints and firms have strong incentives to suppress negative information...

Recent theoretical work suggests that short sellers can manipulate firms into making suboptimal investment decisions. In this study, I empirically test whether short sellers improve or harm the efficiency of firms' capital investment. Overall, I show that short selling improves the efficiency of...

Despite strong theoretical predictions based on disagreement, limited empirical evidence has linked short selling restrictions to higher prices. We test this relationship using quasi-experimental methods based on Rule 201, a threshold-based policy that restricts aggressive short selling when...

We show that common short sold capital can explain future six-factor excess return correlation one month ahead, controlling for many pair characteristics, including similarities in size, book-to-market, and momentum. We explore the possible mechanisms that could give rise to this relationship....

Prior research shows that failures to deliver, which commonly occur around initial public offerings (IPOs), typically result from underwriter price stabilization. Additionally, investors often establish short positions in IPO stocks that are unrelated to underwriter price stabilization. We study...

I derive the term structure of short selling costs using the put-call parity relationship. The shape is determined by informed investors' beliefs of when negative information will enter the market and correct the overpricing. I show that forward costs predict future costs and stock returns,...

At the end of January 2021, a group of stocks listed on US stock exchanges experienced sudden surges in their stock prices, which - coupled with high short interest – led to brief short squeeze episodes. We argue that these short squeezes were the result of coordinated trading by retail...