Reddit's Self-Organised Bull Runs

Semenova, Valentina and Winkler, Julian (2020): Reddit's Self-Organised Bull Runs.

Abstract

Tracking endogenous fluctuations in stock prices emerged as a key challenge for empirical work in behavioural and evolutionary finance. This paper uses new data from an online discussion forum, Reddit, to quantify social contagion, or `hype,' in specific stock market movements, using state of the art opinion dynamics modelling and sentiment analysis. The influence between users on the WallStreetBets (WSB) subreddit is measured by tracing the probability of a user starting a fresh discussion on an asset given their previous involvement in a discussion on the same asset, measured by their comment history. This paper finds that users who comment on one discussion involving a particular asset are approximately four times more likely to start a new discussion about this asset in the future, with the probability increasing with each additional discussion the user engages in. This is a strong indication that investment strategies are reproduced through social interaction. This is further validated by findings that sentiments expressed in the linked submissions are strongly correlated in a set of spatial regression models. In particular, bearish sentiments seem to spread more than their bullish counterparts.

• Item Type: MPRA Paper
• Language: English
• Keywords: Network Economics, Opinion Dynamics, Natural Language Processing, Behavioral Finance
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D85 - Network Formation and Analysis: Theory; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading

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