Stocks That Are Hard to Short Tend to Underperform, Study Finds
• Study found stocks that are difficult to short tend to underperform the market due to overvaluation or underreaction to news
• List of "Constrained Winners" - stocks difficult to short that did very well last year, likely to underperform
• List of "Constrained Losers" - stocks difficult to short that did poorly last year, also likely to underperform
• Implication is to avoid these stocks, or consider shorting them despite difficulty/costs
• Concern that if too many investors short these stocks, it could eliminate the edge