Reddit v. Wall Street: Why Redditors beat Wall Street at its own game

(1) Redmond High School, Redmond, Washington, (2) Princeton University, Princeton, New Jersey

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In January of 2021, users of the internet forum Reddit, known as Redditors, caused a short squeeze of GameStop that led to major loses for short sellers. In our research, we sought to find potential incentives behind the sudden increase in GameStop stock price during the start of 2021. We hypothesized that those who were involved in this event spent large sums of money to purchase stock because they wanted to fight back against Wall Street, who they perceived as the “big guys” who had been controlling the stock market for a long time. Using a combination of methods, we showed that their true motivations may not have been strictly financial. Through qualitative analysis, we found that after the peak in GME stock prices, Redditors generally expressed positive emotions towards the short squeeze. Quantitative analysis revealed that although Redditors initially used neutral language towards the short squeeze, they increasingly used positive language. Thus, our research suggests that Redditors may have initially been financially motivated to short-squeeze GameStop stock, but as time progressed, emotional motivations may have become more important. Our work shows that social phenomena can be dynamic and evolve. It also highlights the value of using a mixed methods approach to study complex processes in the real world. It is important to note that we were only able to learn the motivations of Redditors who posted on the r/WallStreetBets community, and though they had a significant influence on the short squeeze, they were realistically not the only shareholders, meaning our results are not applicable for all the shareholders.

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