In view of the acceptance of short selling of stocks as an investment tool in the portfolio context by a growing number of institutional investors in recent years, the present study considers both normative and market-equilibrium aspects of portfolio selection with short selling. Under the full-information covariance structure of security returns, the study accurately captures institutional procedures for short selling without sacrificing analytical tractability. While short selling enhances the portfolio's risk-return trade-off from a normative perspective, the equilibrium analysis reveals that there is a continuum of market-clearing prices within two boundaries for each security. Economic implications of the equilibrium pricing relationship are also explored in the study.