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

Author

Listed:
  • Ryan G. Chacon

    (University of Colorado)

  • Thibaut G. Morillon

    (Elon University)

  • Ruixiang Wang

    (Clark University)

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.

Suggested Citation

  • Ryan G. Chacon & Thibaut G. Morillon & Ruixiang Wang, 2023. "Will the reddit rebellion take you to the moon? Evidence from WallStreetBets," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 37(1), pages 1-25, March.
    • Handle: RePEc:kap:fmktpm:v:37:y:2023:i:1:d:10.1007_s11408-022-00415-w
    DOI: 10.1007/s11408-022-00415-w
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    More about this item

    Keywords

    Reddit; Retail investors; Wallstreetbets; Trading;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G4 - Financial Economics - - Behavioral Finance
    • G5 - Financial Economics - - Household Finance

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