We argue that the sheer rational expectation about some typical behaviors of retail investors can induce large and persistent overpricing in popular high-risk stocks. It is well-known that retail investors like distressed stocks. Hence, in a distress scenario, retail investors' increased demand,...

This paper argues that short selling might give rise to bubbles that would otherwise not exist in equilibrium. It is crucial for the argument that short selling is not the same as issuing an asset: it may require buying the stock later on. An asset with no fundamental value might be traded at...