On the Efficiency of Meme Stocks
8 Pages Posted: 17 May 2021 Last revised: 12 Jul 2021
Date Written: July 7, 2021
Meme stocks have received a lot of attention in the media from both investors and regulators in recent months. The power of the crowd, coupled with the unprecedented coordination of social media investors, raises questions about their impact on information efficiency. We construct two meme stock indices based on stocks whose purchase the Robinhood app restricted during the GameStop episode. We provide evidence of meme stock market efficiency. Our results indicate, perhaps contrary to some early speculation, that since early 2020, this new influx of highly connected retail investors improves market efficiency.
Keywords: Market Efficiency; Meme Stocks; Random Walk; Social Trading
JEL Classification: G14; G12; G41
Suggested Citation: Suggested Citation