Social contagion and asset prices: Reddit's self-organized bull runs

Abstract

In recent years, online discussion platforms have amplified the impact of social forces on financial markets. This paper uses text data from Reddit's WallStreetBets (WSB) forum to document that user sentiments about assets' future performances are motivated, in part, by peers. The paper then estimates the effect of WSB activity on asset prices in three ways. We document: higher retail trader demand following WSB discussions, the impact of idiosyncratic investor sentiment in viral content on future asset returns, and the significant activity of WSB users around bubble-like stock price run-ups. Our findings suggests that social media can destabilize financial markets.