Short Squeezes

41 Pages Posted: 15 Mar 2012 Last revised: 14 Nov 2023

See all articles by Zhiqian Jiang

Zhiqian Jiang

Xiamen University - School of Management

Baixiao Liu

Peking University HSBC Business School

Andrew Schrowang

Florida State University - Department of Finance

Wei Xu

Peking University - HSBC School of Business

Date Written: October 6, 2021

Abstract

We investigate the prevalence and persistence of short squeezes and the corresponding economic consequences on the stocks being squeezed. Using daily short sale data, we provide evidence that a short squeeze on average subsides within seven trading days and can be driven by both the capital constraint of the short sellers and the short sale constraint of the underlying stocks. The risk of being squeezed is higher during major macroeconomic events. Further analyses reveal that squeezed stocks experience an increase in the demand for and the cost of borrowing the shares and in trading volume, idiosyncratic volatility, and abnormal returns.

Keywords: Short Selling; Short Squeeze; Short Sale Constraint; Price Reversals

JEL Classification: G12, G14

Suggested Citation

Jiang, Zhiqian and Liu, Baixiao and Schrowang, Andrew and Xu, Wei, Short Squeezes (October 6, 2021). Available at SSRN: https://ssrn.com/abstract=2019361 or http://dx.doi.org/10.2139/ssrn.2019361

Zhiqian Jiang

Xiamen University - School of Management ( email )

No.422 Siming Nan Road
Xiamen, Fujian 361005
China

Baixiao Liu (Contact Author)

Peking University HSBC Business School ( email )

Andrew Schrowang

Florida State University - Department of Finance ( email )

821 Academic Way, RBA 311
P.O. Box 3061110
Tallahassee, FL 32306-1042
United States

HOME PAGE: http://sites.google.com/view/andrew-schrowang/home

Wei Xu

Peking University - HSBC School of Business

University Town
Nanshan District
Shenzhen, Guang Dong 518055
China

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