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How online discussion board activity affects stock trading: the case of GameStop

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Listed:
  • André Betzer

    (University of Wuppertal)

  • Jan Philipp Harries

    (University of Wuppertal)

Abstract

In January 2021, the stock price of NASDAQ-listed GameStop Corporation surged more than twenty-fold for no discernible economic reason. Many observers attributed this broadly covered rise to retail investors, organizing themselves in Reddit’s WallStreetBets community. While Social Media-organized trading is not a new phenomenon, the magnitude of the resulting swings in the share price and surge in trading volume of GameStop is unprecedented. Using financial data, as well as an extensive dataset of Reddit posts, we provide empirical evidence for the relationship of Reddit posts and GameStop (retail) trading. While we find a significant and positive relationship between Reddit posts and various trading measures in the following 30-min window in accordance with an attention-based mechanism, our results offer no indication for the informativeness of Reddit posts and hint at a complex and probably nonlinear interdependence between Social-media and trading activity, preventing proof of a one-directional, causal effect.

Suggested Citation

  • André Betzer & Jan Philipp Harries, 2022. "How online discussion board activity affects stock trading: the case of GameStop," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 36(4), pages 443-472, December.
    • Handle: RePEc:kap:fmktpm:v:36:y:2022:i:4:d:10.1007_s11408-022-00407-w
    DOI: 10.1007/s11408-022-00407-w
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    References listed on IDEAS

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    More about this item

    Keywords

    GameStop; Retail trading; Trade volume; Market structure;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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