Document Type

Article

Source of Publication

Research in International Business and Finance

Publication Date

11-1-2022

Abstract

Can a short-squeeze incident trigger financial contagion over heavily shorted companies? The recent GameStop frenzy provides a unique natural experiment to explore this question. This study examines the static and dynamic return and volatility connectedness among the GameStop stock, the novel market-wide and sectoral short-interest indices, and the U.S. stock market. Contrary to anecdotal evidence, we find that the GameStop stock is not a net transmitter but a net recipient of return and volatility spillovers from other companies shorted in the market. This result agrees with the view that short-interest indices provide price discovery for shorted stocks. Therefore, although David might have won a battle against Goliath, he does not seem to win the war.

ISSN

0275-5319

Publisher

Elsevier BV

First Page

101803

Last Page

101803

Disciplines

Business

Keywords

Static and dynamic connectedness, GameStop, short-interest index, stock returns, return volatility, spillovers, WallStreetBets

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Indexed in Scopus

no

Open Access

yes

Open Access Type

Hybrid: This publication is openly available in a subscription-based journal/series

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