Building upon the premises that short squeezes are most likely to occur following a large one-day price increase for stocks with short sale constraints and that they can be captured by the level of subsequent price reversal we investigate how prevalent short squeezes are and the corresponding economic consequences on the stocks being squeezed. Using daily short sale data we find that the occurrence of short squeezes is driven by both the capital constraint of the short sellers and the short sale constraint of the underlying stocks. Further analyses reveal that following a large price increase squeezed stocks experience an increase in the demand for and the cost of borrowing the shares as well as an increase in trading volume idiosyncratic volatility and abnormal returns.