Previous studies have shown that high short interest stocks have low subsequent returns. We test whether the persistence of this effect is due to costs limiting arbitrage. The arbitrage cost that we focus on is idiosyncratic risk which, regardless of the arbitrageur's level of diversification,...

We ask how social media impacts the role of short sellers in financial markets. We find some evidence consistent with manipulation. Prior to high short interest, a stock’s social media tone is abnormally positive, but its traditional media tone is not. Once highly shorted, social media tone...