Market Efficiency and Limits to Arbitrage: Evidence from the Volkswagen Short Squeeze
2017
On October 26, 2008, Porsche announced its domination plan for Volkswagen. This announcement caused a short squeeze that briefly made Volkswagen the most valuable listed company in the world. Using this event and Germany's regulatory framework as a unique experimental setting, we argue that effective disclosure regulation and enforcement of securities laws are important in modern financial markets. We provide the first forensic academic study of the Porsche-VW squeeze and show that it significantly impeded price discovery and market efficiency. These limits to arbitrage in the form of short sale risks imply significant costs to the arbitrageurs involved.
Keywords:
- Correction
- Source
- Cite
- Save
- Machine Reading By IdeaReader
33
References
3
Citations
NaN
KQI