Passive ownership causally affects equity lending: it increases both the quantity and quality of lendable supply, thereby facilitating short selling and improving market efficiency.

Internet Appendix.

Develops a model in which investors are unsure about whether their signals are novel or stale. The model predicts an asymmetric price impact for buys and sells as a function of past returns, for which we find strong support in the data.

Internet Appendix. 

Noise shocks due to mutual fund fire sales spill over onto close economic peers because investors wrongly interpret them as fundamental signals.

Internet Appendix. 

Long-short equity hedge funds resemble constrained arbitrageurs: their trades generate alpha, but positions are closed too early.

Internet Appendix. 

Estimates and describes a realistic noise trading process to help theorists calibrate their models.

Develops a cheap talk model to show that short investment horizons can facilitate information sharing between investors.

Internet Appendix. 

Exploits distracting news events (such as the O.J. Simpson trial) to identify the causal effect of noise trading in financial markets.

Internet Appendix. 

Exploits rich transaction data to identify distraction effects among institutional investors: distracted institutions are less likely to trade and their trades perform worse, but they are not all that rational about allocating their limited attention.

Internet Appendix.