Journal of Financial Economics Vol. 142 No. 1 2021
Market efficiency and limits to arbitrage: Evidence from the Volkswagen short squeeze
open access
Abstract
On October 26, 2008, Porsche announced a largely unexpected domination plan for Volkswagen. The resulting short squeeze in Volkswagen’s stock briefly made it the most valuable listed company in the world. We argue that this was a manipulation designed to save Porsche from insolvency and the German laws against this kind of abuse were not effectively enforced. Using hand-collected data we provide the first rigorous academic study of the Porsche-VW squeeze and show that it significantly impeded market efficiency. Preventing manipulation is important because without efficient securities markets, the EU’s major project of the Capital Markets Union cannot be successful.
- DOI
- 10.1016/j.jfineco.2021.05.015
- Volume
- 142
- Issue
- 1
- Pages
- 166-194
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref