Place Your Bets? The Market Consequences of Investment Advice on Reddit's Wallstreetbets
35 Pages Posted: 22 Mar 2021
Date Written: March 15, 2021
We examine the market consequences of due diligence (DD) reports on Reddit’s Wallstreetbets (WSB) platform. We find average ‘buy’ recommendations result in two-day announcement returns of 1.1%. Further, the returns drift upwards by 2% over the subsequent month and nearly 5% over the subsequent quarter. Retail trading increases sharply in the intraday window following publication, and retail investors are more likely to be net buyers following reports that earn larger returns. Thus, in sharp contrast to regulators concerns that WSB investment advice is harming retail traders, our findings suggest that both WSB posters and users are skilled.
Keywords: Reddit, Wallstreetbets, retail trading, social media, Gamestop
JEL Classification: G20, G23
Suggested Citation: Suggested Citation