Add to ORKGThis dissertation is a collection of three essays on the effects of short-sales and leverage constraints on market efficiency. The first two essays are single-authored, while the third essay is coauthored with Harrison Hong and Jose ́ Scheinkman. The first essay investigates what drives momentum crashes. I argue that momentum crashes are due to crowded trades which push prices away from fundamentals leading to strong reversals, and exacerbated by limits of arbitrage due to impediments to short selling. I show that momentum crashes can be avoided in the cross section by shorting only non-crowded losers. There is considerably more short-covering during times when momentum fails. I show using high frequency transactions data that short coverin...