easy · Market Microstructure market-impact
A 'Short Squeeze' is a market pathology that results from:
- An exchange halting all trading in the affected stock temporarily to prevent a disorderly crash.
- Short sellers being forced to cover their positions as prices rise, creating a feedback loop of buying pressure.
- Dealers defensively widening their quoted bid-ask spreads to avoid trading against better-informed buyers.
- A sudden, unexpected decrease in benchmark interest rates causing bond prices generally to rise across the market.
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