'I Just Like the Stock' versus 'Fear and Loathing on Main Street' : The Role of Reddit Sentiment in the GameStop Short Squeeze
31 Pages Posted: 30 Apr 2021
Date Written: April 8, 2021
This paper investigates the role, if any, played by the social media platform Reddit, in the events around the GameStop short squeeze in early 2021. In particular, we analyse the impact of discussions on the r/WallStreetBets subreddit on the price dynamics of the American online retailer GameStop. We perform textual analysis on 10.8m comments and surface the relationships between the comment sentiments and 1-min GameStop returns. Results indicate that both tone and number of comments influence GME intraday returns. Sentiments extracted from longer threads have a greater influence. Fear is the dominant sentiment in all comments, while comments that express a Sad sentiment show the most significant impact. While investors may just like the stock, it appears that fear and loathing also are important.
Keywords: Gamestop, Reddit, Robinhood, media sentiments, short squeeze, Herding, textual analysis
JEL Classification: D91, G41
Suggested Citation: Suggested Citation