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A Long and a Short Leg Make for a Wobbly Equilibrium

Nicolae Gârleanu et al.

The American Economic Review2026https://doi.org/10.1257/aer.20211548article
FT50AJG 4*ABDC A*
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0.50

Abstract

We provide a model to explain how the interaction between the spot and lending markets for stocks can lead to abrupt changes in short selling activity. Furthermore, rational short sellers may choose to abandon the market even as mispricing widens. We document empirically that the dynamics of short selling are fat tailed and subject to abrupt changes, especially for the stocks that the model identifies as susceptible to such dynamics. (JEL G11, G12, G14, G41)

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https://doi.org/https://doi.org/10.1257/aer.20211548

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@article{nicolae2026,
  title        = {{A Long and a Short Leg Make for a Wobbly Equilibrium}},
  author       = {Nicolae Gârleanu et al.},
  journal      = {The American Economic Review},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1257/aer.20211548},
}

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A Long and a Short Leg Make for a Wobbly Equilibrium

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F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
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R · text relevance †0.50 × 0.4 = 0.20

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