Read the following article and answer the questions: What happened in GameStop stock in January 2021? GameStop is an Ame

[answerhappygod]

Read the following article and answer the
questions:
What happened in GameStop stock in January
2021?
GameStop is an American company that sells video games.
It has 5,509 retail stores throughout the United States, Canada,
Australia, New Zealand, and Europe.
Say you’re a hedge fund that has determined, through
expert analysis, that the future of video-game retail is even more
pessimistic than its present because of the popularity of online
games. One way to make money off that insight would be to borrow
shares of GameStop, sell them for cash, wait for the price of such
shares to inevitably fall, then buy them back at a lower rate and
return the repurchased shares to your lender. This is called
“shorting a stock.” And it can be a risky maneuver. To borrow
shares, you need to put up collateral, and be prepared to return
such shares whenever your lender asks to have them back. If the
shares you borrowed start climbing in value, then you’ll have to
find more collateral to satiate your lender while waiting for the
market to finally recognize the truth of your analysis. If you run
out of collateral, or your lender runs out of patience, you’ll need
to buy back those shares at a loss.
Now, say you are a bored on Reddit, a social media
platform, and you have a small amount of spare capital. One
way to amuse yourself — and potentially make money — would be to
(1) gather with thousands of other similarly inclined people in an
internet forum, (2) identify stocks that are being heavily shorted,
and then (3) collectively buy up a bunch of shares in those stocks,
so as to orchestrate a short squeeze.
As a consequence of the actions of the amateur investors
on Reddit, as described above, by the end of January, GameStop's
stock was up a jaw-dropping 1,587% since the beginning of January.
Melvin Capital, a premier Wall Street hedge fund who had a
significant short position on GameStop, lost 53% in January. Last
week, Citadel, a hedge fund owned by billionaire Ken Griffin,
provided the firm with a more-than-$2-billion bailout.
The surge ultimately had little or nothing to do with
GameStop's strength as a business. As investors following the
Reddit group bought a ton of GameStop options, short-sellers were
forced to buy shares to cover their losing bids — thus boosting the
share price even further. This is what's known as a short
squeeze.
(a) What does the above excerpt suggest about stock
market efficiency; can a phenomenon like a successful short
squeeze, as described above, happen in perfectly efficient markets?
Why/Why not?
(b) How do these inferences about stock market
efficiency you discussed in part (a) impact on the usefulness of
financial analysis?