“I just like the stock”: The role of Reddit sentiment in the GameStop share rally

Abstract

This paper investigates the role played by the social media platform Reddit in the events around the GameStop (GME) share rally in early 2021. In particular, we analyze the impact of discussions on the r/WallStreetBets subreddit on the price dynamics of the American online retailer GameStop.We customize a sentiment analysis dictionary for Reddit platform users based on the Valence Aware Dictionary and Sentiment Reasoner (VADER) sentiment analysis package and perform textual analysis on 10.8 million comments. The analysis of the relationships between Reddit sentiments and 1-, 5-, 10-, and 30-min GameStop returns contribute to the growing body of literature on "meme stocks" and the impact of discussions on investment forums on intraday stock price movements.

Sentiment and the cross‐section of expected stock returns

“…Thus, a low (high) level in the FEARS index can indicate a high (low) sentiment market state. In other studies, a similar approach of the FEARS index has been used to measure retail investors' sentiment (e.g., Long et al 2023).…”

Efficient Market Hypothesis on the blockchain: A social‐media‐based index for cryptocurrency efficiency

“…The relationship of online content with stock markets has also been explored in many studies (Bollen et al, 2011;Bing et al, 2014;Karlemstrand & Leckström, 2021;Lachanski & Pav, 2017). Since the launching of the Derwent Absolute Return Fund Ltd. (Bloomberg, 2010;FT, 2011), researchers have established that online users demonstrate remarkable collective knowledge on financial markets (Aharon et al, 2022;Ante, 2023;Angelico et al, 2022;Long et al, 2023), but also on other significant events (Polyzos, 2023). Despite the liquidation of the Derwent hedge fund (FT, 2012), this relationship is still being explored and validated in various settings.…”

“…A significant part of the recent literature has suggested that social media can serve as an accurate proxy for public information (Aharon et al., 2022; Angelico et al., 2022; Behrendt & Schmidt, 2018; Bianchi et al., 2023; Long et al., 2023). At the same time, crypto markets have baffled researchers.…”

The “Perpetually” Efficient Stock Market Nonsense: The Gaslighting Effects

“…One of the most famous meme stock companies is GameStop. In early 2021, shares in the American video game retailer GameStop surged more than 700% in one week following the speculative involvement of individual investors, a move touted as investors piling in to buy stock they like (Long et al, 2022). The week after the peak, the stock lost around 90%.…”