The spectacular rise and fall of stock prices during the recent dot-com bubble period has been accompanied by a surge of interest in the topic of short-selling. For the most part, this work is cross-sectional in nature, examining the causes and consequences of short-sales constraints at the individual-stock level, and it suggests the following two broad conclusions. First, consistent with the notion that short-selling is undertaken by rational arbitrageurs, the demand for short positions is greatest among stocks that appear to be overvalued. Second, because of frictions in the market for borrowing stock, as well as various institutional rigidities, arbitrage by would-be short-sellers is incomplete. Thus, those stocks where the demand for shorting is greatest tend to have abnormally low future returns.