The causal role of the Reddit collective action on the GameStop short squeeze
CoRR(2024)
摘要
In early 2021, the stock prices of GameStop, AMC, Nokia, and BlackBerry
experienced dramatic increases, triggered by short squeeze operations that have
been largely attributed to Reddit's retail investors. These events showcased,
for the first time, the potential of online social networks to catalyze
financial collective action. How, when and to what extent Reddit users played a
causal role in driving up these prices, however, remains unclear. To address
these questions, we employ causal inference techniques, leveraging data
capturing activity on Reddit and Twitter, and trading volume with a high
temporal resolution. We find that Reddit discussions foreshadowed trading
volume before the GameStop short squeeze, with their predictive power being
particularly strong on hourly time scales. This effect emerged abruptly and
became prominent a few weeks before the event, but waned once the community of
investors gained widespread visibility through Twitter. As the causal link
unfolded, the collective investment of the Reddit community, quantified through
each user's financial position on GameStop, closely mirrored the market
capitalization of the stock. The evidence from our study suggests that Reddit
users fueled the GameStop short squeeze, and thereby Reddit served as a
coordination hub for a shared financial strategy. Towards the end of January,
users talking about GameStop contributed to raise the popularity of BlackBerry,
AMC and Nokia, which emerged as the most popular stocks as the community gained
global recognition. Overall, our results shed light on the dynamics behind the
first large-scale financial collective action driven by social media users.
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