JOURNAL ARTICLE

Place Your Bets? The Value of Investment Research on Reddit's Wallstreetbets.

  • Published In: Review of Financial Studies, 2024, v. 37, n. 5. P. 1409 1 of 3

  • Database: Business Source Ultimate 2 of 3

  • Authored By: Bradley, Daniel; Hanousek, Jan; Jame, Russell; Xiao, Zicheng 3 of 3

Abstract

This article investigates the investment value of due diligence (DD) reports on Reddit’s Wallstreetbets (WSB) platform, focusing on changes before and after the GameStop (GME) short squeeze event in January 2021. It finds that pre-GME, WSB DD reports significantly predicted future stock returns and cash-flow news, indicating informative investment research despite the platform’s anonymity and minimal oversight. However, post-GME, the predictive power of these reports vanished, coinciding with a surge in reports emphasizing price-pressure strategies and attention-grabbing stocks, reflecting a shift in WSB’s user base and culture. The study also shows that small retail investors’ trading was strongly influenced by WSB DD reports pre-GME but not post-GME, suggesting a decline in the quality of information reaching less sophisticated investors. These findings highlight the nuanced role of WSB in financial markets, with implications for regulators and investors regarding the risks and benefits of social media-driven investment research.

Additional Information

  • Source:Review of Financial Studies. 2024/05, Vol. 37, Issue 5, p1409
  • Document Type:Article
  • Subject Area:Business and Management
  • Publication Date:2024
  • ISSN:0893-9454
  • DOI:10.1093/rfs/hhad098
  • Accession Number:176684765
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