Trading Social Media: Just Noise or Predictiue Power? (An Empirical Analysis)

Abstract

We study the relationship between two large social media forums on Reddit and the stock market. We look at whether it is possible to create profitable trading strategies based on data collected from the subreddits and whether social media discussions have an effect on individual stock trading volume and returns. We find that it is possible to create profitable strategies and that the forum members seem to be better at identifying profitable long opportunities rather than short opportunities, and that more frequent trading seems to be the most profitable. We also find that increased social media attention affects trading volume for all companies in our sample, as well as returns for some.