Detecting the great short squeeze on Volkswagen

On 28 October 2008 a short squeeze on Volkswagen stock propelled this car maker to become the world's most valuable company for a day. I study the market behavior empirically and investigate whether the timing of the price spike could have been anticipated from earlier trading. I utilize price information from regional stock exchanges in parallel with the primary electronic trading platform Xetra. Although the trading volume on the seven regional exchanges is small, the geographical variation in traded prices shows anomalies when the law of supply and demand begins to overrule the law of one price, and this is observed more than 24 h ahead of the price peak. I find that the coefficient of variation in the prices at the regional exchanges is a leading indicator of the Volkswagen price spike.