Effect of GameStop Short Squeeze on Private Investor Behavior

Abstract

This thesis seeks to evaluate how the GameStop short squeeze of January 2021 has affected amateur investor behavior, with a special focus on evaluating future short squeeze opportunities. Through a combination of secondary and primary sources, different approaches were investigated with a hermeneutic approach that allows continuous interpretation. Information was sourced from various news sources, and a questionnaire was conducted with 145 participants, all members of an online investment forum on Facebook. The analysis shows strong indications of improved conditions for future short squeezes, through strong indications of increased democratization of the American stock market, improved opportunities for amateur investors to share knowledge and coordinate investments, and availability of real-time short interest data. Based on these indications, the research concludes that amateur investors likely will continue to try to exploit the favorable conditions for identifying short squeeze – hence the frequency of short squeezes will increase in the nearest future. Furthermore, it concludes that while a change in investor behavior has been identified following the GameStop short squeeze, additional research is necessary to determine whether the change was caused by the short squeeze, or if the short squeeze was the culmination of the change.