Aggregate short interest and market valuations

"We examine some basic data on the evolution of aggregate short interest, both during the dot-com era, and at other times in history. Total short interest moves in a countercyclical fashion. For example, short interest in NASDAQ stocks actually declines as the NASDAQ index approaches its peak. Moreover, this decline does not seem to reflect a substitution away from outright short-selling and towards put options, as the ratio of put-to-call volume displays the same countercyclical tendency. The evidence suggests that: i. arbitrageurs are reluctant to bet against aggregate mispricings; and ii. short-selling does not play a particularly helpful role in stabilizing the overall stock market"--National Bureau of Economic Research web site.