The Role of Reddit in the GameStop Short Squeeze

Abstract

Adapting recent innovations in text analysis on microblogging platforms, we present evidence that the tone of discussions on the subredditt r/wallstreetbets (WSB) displayed significant predictive associations with intraday GameStop returns, volatility, bid-ask spreads as well as volumes. Most importantly, we show that the comment distribution on the subreddit obeyed a power law, and that it was a tiny minority of 462 most influential subredditors whose posts most impacted the GME stock returns and volatility.

Keywords: Short Squeeze, GameStop, WallStreetBets

JEL Classification: D91, G14, G40