Squeezing Shorts Through Social News Platforms

Angel Tengulov, Franklin Allen, Eric Nowak and Matteo Pirovano
Additional contact information
Angel Tengulov: Vanderbilt University - Finance
Franklin Allen: Imperial College London
Eric Nowak: Swiss Finance Institute; University of Lugano
Matteo Pirovano: Universita della Svizzera italiana (USI Lugano); Swiss Finance Institute

No 21-31, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: At the end of January 2021, a group of stocks listed on US stock exchanges experienced sudden surges in their stock prices, which - coupled with high short interest – led to brief short squeeze episodes. We argue that these short squeezes were the result of coordinated trading by investors, who discussed their trading strategies on social news platforms. In addition, option markets played a central role in these events. Using hand-collected data we provide the first rigorous academic study of these short-squeezes and show that they significantly impeded market quality not only of the stocks at issue but also of their competitors. This evidence calls for tighter monitoring of social news platforms and a better understanding of the interlinkages between these platforms, derivatives markets and equity markets.

Keywords: Limits to arbitrage; Short selling; Short squeeze; Gamma squeeze; Social news platforms (search for similar items in EconPapers)
JEL-codes: G10 G12 G13 G14 G18 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2021-04
New Economics Papers: this item is included in nep-mst and nep-pay
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2131

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