GameStop vs. Tesla: A Comparison of Event-Driven Volatility

This independent research paper compares changes in stock-price volatility during GameStop’s January 2021 short squeeze and Tesla’s 2020 S&P 500 inclusion. Using historical daily closing-price data, the study calculates daily returns, baseline and event-period volatility, and Event-to-Baseline volatility ratios for both stocks. GameStop’s Event-to-Baseline Ratio was 5.677, compared with 1.683 for Tesla, indicating a substantially larger relative increase in volatility during GameStop’s event period. The paper discusses differences in the structure and predictability of the two events as possible contributing factors while recognizing that the comparison does not establish causality or a general relationship across all short squeezes and index-inclusion events. The paper also discusses limitations of the analysis and directions for future research, including comparisons across additional events and the use of measures such as trading volume, abnormal returns, liquidity and price reversals.