Hedge funds that shorted certain high-flying stocks have been pulverized. Take Tesla, the maker of luxury electric cars. For years, it was a favorite among short-sellers, who questioned everything from its business model to its forecasts for revenues. Despite the pessimism, the stock suddenly gained more than 600 percent from early 2013 until September of last year. The share price has since come down slightly, but at around $260 a share it is still much higher than the roughly $30 a share it traded before the run-up.

“It’s been an extremely difficult period for many short-biased managers, as negative performance during this prolonged bull market has led to capital outflows, forcing some to throw in the towel as others struggle to keep the lights on,” said Joseph Larucci, a co-founder of the hedge fund advisory firm Aksia.

It wasn’t always this way. In the turmoil of the financial crisis, short-sellers were king. Those who bet on the collapse of Lehman Brothers and Bear Stearns made a mint. As the market spiraled violently downward in 2008, the Wall Street banks that were still standing pointed the blame at short-sellers. In September of that year, the Securities and Exchange Commission issued a temporary ban on short-sellers.

Nevertheless, by the end of 2008, short-biased hedge funds had made an average return of 28 percent, compared with a decline of 38 percent across the S.&P. 500, according to HFR.

Image James S. Chanos, a founder of the hedge fund Kynikos Associates, is now adding a fund that will buy stocks. Credit... Brendan Mcdermid/Reuters

Stepping in to pick up the pieces in the aftermath of the crisis, the United States Federal Reserve pumped trillions of dollars into the financial system, pushing up the price of assets. The government also tamped down interest rates to all-time lows, prompting individual investors with retirement and pension funds to look for investments that would yield bigger returns than Treasury securities.

“Every market has its own characteristics, they all have a story and narrative, and this one really is all about the central bank,” said Mr. Chanos, founder of the hedge fund Kynikos Associates. The narrative, he added, is that “the central bank has your back and that’s embedded in everybody’s psyche and portfolio.”