Will the reddit rebellion take you to the moon? Evidence from WallStreetBets

Ryan G. Chacon (), Thibaut G. Morillon () and Ruixiang Wang ()
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Ryan G. Chacon: University of Colorado
Thibaut G. Morillon: Elon University
Ruixiang Wang: Clark University

Financial Markets and Portfolio Management, 2023, vol. 37, issue 1, No 1, 25 pages

Abstract: Abstract In early 2021, several stocks receiving attention from retail traders known as “meme stocks” soared in value. A primary source of information regarding these stocks is from the social media platform Reddit, specifically from a subreddit known as WallStreetBets (WSB).This paper investigates whether a simple and easily implementable trading strategy following the WallStreetBets (WSB) subreddit can produce alpha. We document no evidence this is the case. Though we do observe a positive relation between WSB submissions and abnormal trading volume, we find that a portfolio that goes long buy recommendations and short sell recommendations each day is not profitable on a risk-adjusted basis. Holding periods from one day to one year fail to produce alpha. These findings are robust to a variety of different portfolio formation strategies. Our results provide an early look at the data following the explosion of interest in social media inspired retail investing.

Keywords: Reddit; Retail investors; Wallstreetbets; Trading (search for similar items in EconPapers)
JEL-codes: G1 G4 G5 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11408-022-00415-w

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