Place Your Bets? The Market Consequences of Investment Advice on Reddit's Wallstreetbets

35 Pages Posted: 22 Mar 2021

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

Jan Hanousek Jr.

University of South Florida; Mendel University - Mendel University in Brno

Russell Jame

University of Kentucky - Gatton College of Business and Economics

Zicheng Xiao

University of South Florida

Date Written: March 15, 2021

Abstract

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

Bradley, Daniel and Hanousek Jr., Jan and Jame, Russell and Xiao, Zicheng, Place Your Bets? The Market Consequences of Investment Advice on Reddit's Wallstreetbets (March 15, 2021). Available at SSRN: https://ssrn.com/abstract=3806065 or http://dx.doi.org/10.2139/ssrn.3806065

Daniel Bradley (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

Jan Hanousek Jr.

University of South Florida ( email )

Tampa, FL 33620
United States

Mendel University - Mendel University in Brno ( email )

Zemědělská 1
Brno, 61300
Czech Republic

Russell Jame

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

HOME PAGE: http://russelljame.com

Zicheng Xiao

University of South Florida

United States

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