Place your bets? The market consequences of investment advice on Reddit’s Wallstreetbets

Daniel Bradley (), Jan Hanousek (), Russell Jame () and Zicheng Xiao ()
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Daniel Bradley: Department of Finance, University of South Florida, Tampa, FL 33620
Jan Hanousek: Department of Finance, University of South Florida, Tampa, FL 33620, Faculty of Business and Economics, Department of Finance, Mendel University in Brno, Czech Republic
Russell Jame: Gatton College of Business, University of Kentucky, Lexington, KY 40515
Zicheng Xiao: Department of Finance, University of South Florida, Tampa, FL 33620

No 2021-76, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: We examine the market consequences of due diligence (DD) reports on Reddit’s Wallstreetbets (WSB) platform. We find average ‘buy’ recommendations result in two-day announcement returns of 1.1%. Further, the returns drift upwards by 2% over the subsequent month and nearly 5% over the subsequent quarter. Retail trading increases sharply in the intraday window following publication, and retail investors are more likely to be net buyers following reports that earn larger returns. Thus, in sharp contrast to regulators concerns that WSB investment advice is harming retail traders, our findings suggest that both WSB posters and users are skilled.

Keywords: Reddit; Wallstreetbets; retail trading; social media (search for similar items in EconPapers)
JEL-codes: G20 G23 (search for similar items in EconPapers)
Pages: 36
Date: 2021-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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