The Echo Chamber Effect Resounds on Financial Markets: A Social Media Alert System for Meme Stocks

Gianstefani, Ilaria; Longo, L.; Riccaboni, Massimo

doi:10.2139/ssrn.4053771

Cited by 2 publications

(1 citation statement)

References 14 publications

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“…At last, there is the very practical question of understanding how the dynamics of mass coordination reflect quantitatively on financial market movements. All these issues certainly represent interesting directions for future research 55,56 .…”

Section: Discussionmentioning

confidence: 95%

Self-induced consensus of Reddit users to characterise the GameStop short squeeze

Mancini

Desiderio

Clemente

et al. 2022

Sci Rep

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The short squeeze of GameStop (GME) shares in mid-January 2021 has been primarily orchestrated by retail investors of the Reddit r/wallstreetbets community. As such, it represents a paramount example of collective coordination action on social media, resulting in large-scale consensus formation and significant market impact. In this work we characterise the structure and time evolution of Reddit conversation data, showing that the occurrence and sentiment of GME-related comments (representing how much users are engaged with GME) increased significantly much before the short squeeze actually took place. Taking inspiration from these early warnings as well as evidence from previous literature, we introduce a model of opinion dynamics where user engagement can trigger a self-reinforcing mechanism leading to the emergence of consensus, which in this particular case is associated to the success of the short squeeze operation. Analytical solutions and model simulations on interaction networks of Reddit users feature a phase transition from heterogeneous to homogeneous opinions as engagement grows, which we qualitatively compare to the sudden hike of GME stock price. Although the model cannot be validated with available data, it offers a possible and minimal interpretation for the increasingly important phenomenon of self-organized collective actions taking place on social networks.

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Section: Discussionmentioning

confidence: 95%

Self-induced consensus of Reddit users to characterise the GameStop short squeeze

Mancini

Desiderio

Clemente

et al. 2022

Sci Rep

View full text Add to dashboard Cite

show abstract

One-way ticket to the moon? An NLP-based insight on the phenomenon of small-scale neo-broker trading

Kant,

Zhelyazkov,

Thielmann

et al. 2024

Soc. Netw. Anal. Min.

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We present an Natural Language Processing based analysis on the phenomenon of “Meme Stocks”, which has emerged as a result of the proliferation of neo-brokers like Robinhood and the massive increase in the number of small-scale stock investors. Such investors often use specific Social Media channels to share short-term investment decisions and strategies, resulting in partial collusion and planning of investment decisions. The impact of online communities on the stock prices of affected companies has been considerable in the short term. This paper has two objectives. Firstly, we chronologically model the discourse on the most prominent platforms. Secondly, we examine the potential for using collaboratively made investment decisions as a means to assist in the selection of potential investments.. To understand the investment decision-making processes of small-scale investors, we analyze data from Social Media platforms like Reddit, Stocktwits and Seeking Alpha. Our methodology combines Sentiment Analysis and Topic Modelling. Sentiment Analysis is conducted using VADER and a fine-tuned BERT model. For Topic Modelling, we utilize LDA, NMF and the state-of-the-art BERTopic. We identify the topics and shapes of discussions over time and evaluate the potential for leveraging information of the decision-making process of investors for trading choices. We utilize Random Forest and Neural Network Models to show that latent information in discussions can be exploited for trend prediction of stocks affected by Social Network driven herd behavior. Our findings provide valuable insights into content and sentiment of discussions and are a vehicle to improve efficient trading decisions for stocks affected from short-term herd behavior.

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The Echo Chamber Effect Resounds on Financial Markets: A Social Media Alert System for Meme Stocks

Cited by 2 publications

References 14 publications

Self-induced consensus of Reddit users to characterise the GameStop short squeeze

Self-induced consensus of Reddit users to characterise the GameStop short squeeze

One-way ticket to the moon? An NLP-based insight on the phenomenon of small-scale neo-broker trading

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