Squeezing Shorts Through Social Media Platforms
Swiss Finance Institute Research Paper No. 21-31
100 Pages Posted: 12 Apr 2021 Last revised: 18 Aug 2022
Date Written: August 17, 2022
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: Suggested Citation