Journal of Financial and Quantitative Analysis Vol. 59 No. 1 2024
Short Squeezes and Their Consequences
open access
Abstract
A short squeeze occurs if borrowed shares are recalled and the short seller is unable to find another source of shares. This forces the short seller to terminate a position early. For most stocks, the probability of a short squeeze is very low. Short squeezes, however, are not unusual for the hardest to borrow stocks. For these stocks, trading costs from squeezes are high and have a significant impact on the returns to short selling. For hard-to-borrow stocks, short sellers also miss out on significant abnormal returns because squeezes force them to close positions.
- DOI
- 10.1017/s0022109022001533
- Volume
- 59
- Issue
- 1
- Pages
- 68-96
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib