Jesse Blocher and Matt Ringgenberg
Unpublished working paper - not for distribution
Publication year: 2016

Most asset pricing models assume short selling is costless. We show that short selling is extremely expensive precisely when arbitrage opportunities are greatest and therefore that short selling restrictions play a vital role in explaining mispricing. This paper is under significant revision to better estimate short-selling constraints historically.

  • Thanks to Karl Diether and Dennis Gromb for useful comments.