There are large cross-sectional differences in the probability and magnitude of mispricing among stocks. Mispricing is traditionally attributed to stock-specific frictions. We show that mispricing can be explained in a rational equilibrium where investors allocate investigative resources to...

Using international data on equity loans and financial news stories across 29 countries, I find that short sellers’ informational advantage comes mostly from their superior ability to process public news. With a novel method to estimate the amount of shorting from outstanding equity loans, I...