Squeezing Shorts Through Social Media Platforms

Swiss Finance Institute Research Paper No. 21-31

89 Pages Posted: 12 Apr 2021 Last revised: 22 Jun 2022

See all articles by Franklin Allen

Franklin Allen

Imperial College London

Marlene Haas

Independent

Eric Nowak

Swiss Finance Institute; Universita della Svizzera italiana (USI Lugano)

Matteo Pirovano

Universita della Svizzera italiana (USI Lugano); Swiss Finance Institute

Angel Tengulov

University of Kansas - School of Business

Date Written: March 10, 2021

Abstract

At the end of January 2021, a group of stocks listed on US stock exchanges experienced sudden price increases, which – coupled with high short interest – led to short-squeeze episodes. We find that these events were fueled by retail investors and social media platforms. Options markets also played a central role. Using hand-collected data we provide the first rigorous study of these short squeezes and show that they significantly impeded market quality for the stocks at issue and their competitors. Increased retail investor participation thus has risks as well benefits.

Keywords: Limits to arbitrage; Short selling; Short squeeze; Gamma squeeze; GameStop, Social media platforms, Retail investors

JEL Classification: G10; G12; G13; G14; G18

Suggested Citation

Allen, Franklin and Haas, Marlene and Nowak, Eric and Pirovano, Matteo and Tengulov, Angel, Squeezing Shorts Through Social Media Platforms (March 10, 2021). Swiss Finance Institute Research Paper No. 21-31, Available at SSRN: https://ssrn.com/abstract=3823151 or http://dx.doi.org/10.2139/ssrn.3823151

Franklin Allen

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Marlene Haas

Independent

Eric Nowak

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Universita della Svizzera italiana (USI Lugano) ( email )

Matteo Pirovano

Universita della Svizzera italiana (USI Lugano) ( email )

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Angel Tengulov (Contact Author)

University of Kansas - School of Business ( email )

1654 Naismith Dr
Lawrence, KS 66045
United States

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

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