GameStop, AMC and the Self-Fulfilling Beliefs of Stock Buyers

Gaston Chaumont, Grey Gordon and Bruno Sultanum

Richmond Fed Economic Brief, 2021, vol. 21, issue 13

Abstract: The recent stock market gyrations of GameStop and AMC Entertainment illustrate that companies' fates can sometimes hinge on self-fulfilling beliefs. Pessimistic expectations can raise the specter of bankruptcy, while optimistic expectations can allow for survival and eventual success. We show how it is sometimes possible for small coalitions of buyers — such as those that formed on the online forum Reddit — to tip the balance in favor of an optimistic scenario. By doing so, a coalition can reap large profits and fundamentally improve a company's prospects.

Date: 2021
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