ABSTRACT
In January 2021, a short squeeze of video game retailer GameStop (GME) caused large losses for short sellers, primarily hedge funds. The short squeeze was initially by meme investors using Reddit’s subreddit r/wallstreetbets forum. Their interaction via social media combined with the gamification of the Robinhood trading platform led to many behavioral biases and emotions. They believed that GameStop was under attack from unscrupulous short sellers. To punish the hedge funds and get rich themselves, they banded together and bought GME. The price climbed. That was followed by a rush from hedge funds to buy shares to cover their short positions. At its height, on January 28, the short squeeze caused the stock price to reach $483 per share, over 25 times the $19 valuation three weeks earlier.
