We develop a dynamic model of costly stock short-selling and lending market and obtain implications that simultaneously support many empirical regularities related to short-selling. In our model, investors’ belief disagreement leads to shorting demand, whereby short-sellers pay shorting fees to borrow stocks from lenders. Our main novel results are as follows. Short interest is positively related to shorting fee and predicts stock returns negatively. Higher short-selling risk can be associated with lower stock returns and less short-selling activity. Stock volatility is increased under costly short-selling. An application to GameStop episode yields implications consistent with observed patterns.

中文翻译：

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动态均衡与昂贵的卖空和借贷市场

我们开发了一个成本高昂的股票卖空和借贷市场的动态模型，并获得了同时支持与卖空相关的许多经验规律的含义。在我们的模型中，投资者的信念分歧导致卖空需求，卖空者支付卖空费用以从贷方借入股票。我们的主要新颖结果如下。卖空利息与卖空费用呈正相关，并与股票收益呈负相关。较高的卖空风险可能与较低的股票回报和较少的卖空活动相关。代价高昂的卖空行为加剧了股票波动性。对 GameStop 事件的应用产生了与观察到的模式一致的含义。