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Robinhood, Reddit, and the news: The impact of traditional and social media on retail investor trading

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  • Münster, Markus
  • Reichenbach, Felix
  • Walther, Martin

Abstract

We study the impact of social media posts and news articles on retail trading on Robinhood by analyzing the net buying activity before and after a (social) media publication. Our findings indicate that both publication types lead to an increase of holders. However, both effects are short-lived, and the effect of social media posts on retail trading is significantly higher. Furthermore, investors buy stocks that are recommended on Reddit regardless of text sentiment. However, they act as contrarians by selling stocks with positive news coverage and vice versa. We thus find evidence for both attention- and information-driven trading behavior.

Suggested Citation

  • Münster, Markus & Reichenbach, Felix & Walther, Martin, 2024. "Robinhood, Reddit, and the news: The impact of traditional and social media on retail investor trading," Journal of Financial Markets, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finmar:v:71:y:2024:i:c:s1386418124000478
    DOI: 10.1016/j.finmar.2024.100929
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    More about this item

    Keywords

    Retail investors; Reddit; Robinhood; Media; Attention; Information;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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