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

Aug 4, 2026

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Can a short-squeeze episode trigger financial contagion across heavily shorted firms? The GameStop frenzy offers a natural experiment to study static and dynamic return and volatility connectedness among the GameStop stock, market-wide and sectoral short-interest indices, and the U.S. stock market. The findings show the GameStop stock is not a net transmitter but a net recipient of spillovers from other shorted companies. This supports the role of short-interest indices in price discovery for shorted stocks, implying no sustained “war” victory despite a “battle” effect.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages20

Reading Time50 min

AccessFree to download

Abstract

Introduction

Research Question and Motivation

Zayed University ZU Scholars All Works 11-1-2022 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 David Y. Aharon Ono Academic College Renatas Kizys University of Southampton Zaghum Umar Zayed University; South Ural State University Adam Zaremba Montpellier Business School; University of Montpellier; Poznań University of Economics and Business Follow this and additional works at: [https://zuscholars.zu.ac.ae/works](https://zuscholars.zu.ac.ae/works) Part of the Business Commons Recommended Citation 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. [https://zuscholars.zu.ac.ae/works/5467](https://zuscholars.zu.ac.ae/works/5467) This Article is brought to you for free and open access by ZU Scholars. It has been accepted for inclusion in All Works by an authorized administrator of ZU Scholars. For more information, please contact [scholars@zu.ac.ae](scholars@zu.ac.ae). Research in International Business and Finance 64 (2023) 101803 Contents lists available at ScienceDirect Research in International Business and Finance journal [homepage: www.elsevier.com/locate/ribaf](homepage: www.elsevier.com/locate/ribaf) | 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
David Y. Aharon a, Renatas Kizysb, *, Zaghum Umar c, d, Adam Zaremba e, f, g
a Ono Academic College, Faculty of Business Administration, Tzahal St 104, Kiryat Ono, Israel
b University of Southampton, Southampton Business School, Department of Banking and Finance, Room 1013, Building 4, Highfield Campus, Southampton SO17 1BJ, United Kingdom
c Zayed University, College of Business, P.O. Box 144534, Abu Dhabi, United Arab Emirates d South Ural State University, Chelyabinsk, Russian Federation
e Montpellier Business School, 2300 Avenue des Moulins, 34185 CEDEX 4 Montpellier, France f Montpellier Research in Management, University of Montpellier, Montpellier, France
g Poznan University of Economics and Business, Institute of Finance, Department of Investment and Financial Markets, al. Niepodległo´sci 10, 61-875 Pozna´n, Poland | | | | --- | --- | --- | | A R T I C L E I N F O | | A B S T R A C T | | JEL Classifications: G10
G11
G14
G41
Keywords:
Static and dynamic connectedness GameStop
Short-interest index Stock returns Return volatility Spillovers WallStreetBets | | 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. | 1. Introduction How effective can betting against professional, institutional investors be? How noisy can the activity of uninformed investors to the“smart money” be? Can intentional herding by retail investors be the source of risk shocks for sophisticated investors? The recent story of the GameStop frenzy, featured in social media and financial newspapers worldwide, provides some interesting insights into these * Corresponding author. E-mail addresses: [dud

FAQs

What research question does the study address about GameStop?

Whether a short-squeeze incident can trigger financial contagion, measured through static and dynamic return and volatility connectedness.

How do the results characterize GameStop’s role in connectedness?

GameStop is a net recipient rather than a net transmitter of return and volatility spillovers from other heavily shorted companies.

What do the findings imply about short-interest indices?

Short-interest indices support price discovery for shorted stocks, aligning with the observed spillover direction.

Aug 4, 2026

Upload by Himbo