Comovements between heavily shorted stocks during a market squeeze: Lessons from the GameStop trading frenzy

Zaghum Umar, Imran Yousaf and Adam Zaremba ()

Research in International Business and Finance, 2021, vol. 58, issue C

Abstract: We examine the comovements between stock prices of different heavily shorted companies during a short-squeeze incident. Using the recent GameStop trading frenzy as a case study, we employ wavelet coherence analyses to determine its link with other frequently shorted stocks. We demonstrate a robust positive association between GameStop prices and the performance of high short interest indices. The bubble behavior driven by retail investor herding transmits between different stocks, even from unrelated sectors. Consequently, a single short-squeeze incident may build up into a potentially broader systemic risk, casting doubt on market integrity and stability.

Keywords: GameStop; Wavelet coherence; Comovements; Short squeeze; Retail investors; Robinhood app; r/wallstreetbets; Investor herding; Social media; High short interest (search for similar items in EconPapers)
JEL-codes: G10 G11 G14 G41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S027553192100074X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:58:y:2021:i:c:s027553192100074x

DOI: 10.1016/j.ribaf.2021.101453

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().