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How Prevalent Are Short Squeezes? Evidence From the US and Europe

Author

Listed:
  • Crocker Franklin Allen

    (Imperial College London)

  • Marlene Haas

    (Independent)

  • Matteo Pirovano

    (Universita della Svizzera italiana; Swiss Finance Institute)

  • Angel Tengulov

    (University of Kansas)

Abstract

A short squeeze is triggered if there is pressure on short sellers to cover their positions because of a sharp price increase or a recall of borrowed shares. This drives short sellers to close their positions early. We find that stock-day short-squeeze events are rare and short-lived. However, the proportion of unique stocks experiencing a short squeeze in a given year is 25% in both the US and the EU. While we find an uptick in the number of firms experiencing a squeeze in recent years in the US, squeezes are relatively constant across time in the EU. We also review the academic literature on the topic and provide directions for future research.

Suggested Citation

  • Crocker Franklin Allen & Marlene Haas & Matteo Pirovano & Angel Tengulov, 2023. "How Prevalent Are Short Squeezes? Evidence From the US and Europe," Swiss Finance Institute Research Paper Series 23-63, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2363
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4526147
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    More about this item

    Keywords

    Short squeeze; stock cornering; market misconduct; disclosure and securities regulation;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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