If He's Still in, I'm Still in! How Reddit Posts Affect Gamestop Retail Trading

Abstract

In January 2021, the stock price of NASDAQ-listed GameStop Corporation surged more than thirty-fold following frenzied discussions on a Reddit forum. While Social Media-organized retail trading is not a new phenomenon, the magnitude of the resulting swings in GameStop's share price in combination with a short- and/or gamma squeeze scenario is unprecedented. Using financial data as well as an extensive dataset of Reddit posts, we show that Reddit posts lead to increased retail trading activity in GameStop shares and introduce a new option-based measure for retail trading proportion which could help academics, regulators and investors to track and analyze similar developments in the future.

Keywords: GameStop, Retail Trading, Sentiment Trading, Market Structure

JEL Classification: D91, G14, G41