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

63 Pages Posted: 22 Mar 2021 Last revised: 3 Nov 2021

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

Jan Hanousek Jr.

University of South Florida; Mendel University in Brno - 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. Over the 2018-2020 sample, we find that DD recommendations are significant predictors of one-month ahead returns, earnings forecast revisions, and earnings surprises. In addition, user comments are incrementally useful for predicting returns, and small retail trade informativeness increases following DD reports. However, all of these benefits reverse in the first half of 2021. Our findings are consistent with the surge in new WSB users following the Gamestop short squeeze significantly deteriorating its investment quality and usefulness for smaller investors.

Keywords: Reddit, Wallstreetbets, WSB, retail trading, social media, Gamestop, AMC

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 Research 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 in Brno - 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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