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...

I find that short interest significantly and negatively predicts aggregate stock returns in 24 out of 32 countries examined. This predictability survives out-of-sample tests, persists outside recessions, and is not subsumed by other well-known return predictors. The results indicate that short...