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The Irrational Market: Considering the effect of the online community Wall Street Bets on Financial Market Variables

Author

Listed:
  • David William Witts

    (Business School, Durham University, UK)

  • Emili Tortosa-Ausina

    (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain)

  • Iván Arribas

    (IVIE, ERI-CES and Department of Economic Analysis, Universitat de València, Spain)

Abstract

The rise of the Internet, social media and the unfettered access to financial markets has fostered a new era of retail investing. Investing is no longer the activity of the professional, but is available to all, and being exploited to the greatest extent by users of Wall Street Bets. This research considered the implications of retail investors within the Wall Street Bets community on financial markets. Utilising VAR, ARDL and VECM models, we find that Wall Street Bets sentiment provides some incremental investment information, illustrating short-term predictive power over returns of specific assets, and may be beneficial in forecasting short-term volatility and trading volume.

Suggested Citation

  • David William Witts & Emili Tortosa-Ausina & Iván Arribas, 2021. "The Irrational Market: Considering the effect of the online community Wall Street Bets on Financial Market Variables," Working Papers 2021/13, Economics Department, Universitat Jaume I, Castellón (Spain).
    • Handle: RePEc:jau:wpaper:2021/13
    as

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    More about this item

    Keywords

    ARDL models; Reddit; Sentiment Analysis; VADER; Wall Street Bets;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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