A new academic study finds that Wall Street Bets traders are more skilled and responsible than they get credit for

A new academic study finds that Wall Street Bets traders are more skilled and responsible than they get credit for

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A new academic study finds that Wall Street Bets traders are more skilled and responsible than they get credit for
Wall Street Bets users raise GameStop share price

REUTERS / Dado Ruvic / Illustration / File Photo

  • Traders who regularly visit Reddit’s WallStreetBets forum do not get the credit they deserve when making investment decisions, according to a new research study.
  • The epic GameStop short print and subsequent congressional hearings brought Reddit’s WallStreetBets into the mainstream earlier this year.
  • “Contrary to regulators’ concerns that WSB investment advice harms retailers, our findings suggest that both WSB posters and users are skilled,” the study concluded.
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Reddit’s WallStreetBets forum has gained a reputation for being a people-encouraged casino, where members throw out risky investment ideas and bet their life savings, but real-world data suggests users of the forum post serious caution insurance reports and according to them is quite proficient. to a new research study.

“Despite the conventional view that the platform mainly attracts uninformed investors, we find no systematic evidence of this,” the research authors write.

Place your bets? The market effects of investment advice on Reddit’s Wallstreetbets by researchers Daniel Bradley, Jan Hanousek, Russell Jame and Zicheng Xiao, found that the average recommendation on buying on the forum yielded two-day returns of 1.1%, with a subsequent return of 2% in the following month and 5 % return in the next month quarter.

Furthermore, the buying activity in equities over which a WallStreetBets prudential report appears is usually driven by retail investors, with the volumes increasing sharply in the intraday window after publication.

“We find that prudential investigation reports contain investment value,” the study said, adding that retail investors can discern the quality of the reports.

‘Contrary to regulators’ concerns that WSB investment advice harms retailers, our findings suggest that both WSB posters and users are proficient …[and] will probably benefit from the recommendations on the website, ”the newspaper concluded.

The researchers scraped all WallStreetBets reports from 2018 to 2020, sorted for information reports with clear recommendations to buy or sell, and then manually reviewed the symbols and accompanying recommendations.

The analysis does not include the analysis of the explosion in posts that the Reddit forum saw after its membership in the midst of the GameStop short print increased to nearly 10 million.

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