Did David Win a Battle or the War Against Goliath? Dynamic Return and Volatility Connectedness between the GameStop Stock and the High Short Interest Indices
Source of Publication
Research in International Business and Finance
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.
Static and dynamic connectedness, GameStop, short-interest index, stock returns, return volatility, spillovers, WallStreetBets
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Aharon, David Y.; Kizys, Renatas; Umar, Zaghum; and Zaremba, Adam, "Did David Win a Battle or the War Against Goliath? Dynamic Return and Volatility Connectedness between the GameStop Stock and the High Short Interest Indices" (2022). All Works. 5467.
Indexed in Scopus
Open Access Type
Hybrid: This publication is openly available in a subscription-based journal/series