Title

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

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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