WallStreetBets: An Analysis of Investment Advice Democratization

Abstract

Reddit's WallStreetBets (WSB) community has come to prominence due to its role in the hype around GameStop and other meme stocks. Yet very little is known about the reliability of the investment advice disseminated on WSB. We investigate whether an anonymous, investment-focused community such as WSB can be a valuable source for investment advice and thus may constitute a way of democratizing access to financial knowledge. Our analysis reviews data spanning 28 months to assess how successful an investor relying on WSB recommendations could have been. We detect buy and sell signals and define a WSB portfolio based on the community's most popular stocks. Our evaluation shows that this portfolio has grown significantly, outperforming the S&P 500 over the reviewed time frame. We find that filtering for proactive posts yields higher returns and our review of the period before 2021 shows that the GameStop hype merely amplified previously existing characteristics.