Media Trading Groups and Short Selling Manipulation--Are Media Groups Efficiency Enhancing or Reducing?

53 Pages Posted: 15 Mar 2021 Last revised: 25 Mar 2021

See all articles by Robert Jarrow

Robert Jarrow

Cornell SC Johnson College of Business

Siguang Li

Cornell University, Dept. of Economics

Date Written: March 1, 2021

Abstract

This paper models how chatroom traders, unionized via social media platforms, influence the stock price through momentum trading in the presence of large and strategic short sellers. The economic consequences of this dynamic game are studied in a quasi-competitive equilibrium framework, which is new to the literature. Depending on the market structure, various equilibrium phenomena arise, including short squeezes, forced liquidations, and precautionary savings by the large trader. Media groups discipline the large trader's incentive to short sell, but it can be either efficiency enhancing or reducing.

Keywords: GameStop, Market Manipulation, Short Selling, Short Squeezes, Media Groups, Precautionary Savings, Margin Calls, Forced Liquidations.

JEL Classification: G12, G13, G14, G18.

Suggested Citation

Jarrow, Robert and Li, Siguang, Media Trading Groups and Short Selling Manipulation--Are Media Groups Efficiency Enhancing or Reducing? (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3804130 or http://dx.doi.org/10.2139/ssrn.3804130

Robert Jarrow

Cornell SC Johnson College of Business

Ithaca, NY 14850
United States

Siguang Li (Contact Author)

Cornell University, Dept. of Economics ( email )

404 Uris Hall
Ithaca, NY Tompkins 14853
United States

HOME PAGE: http://www.siguangli.com

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