In the Red(dit): Social Media and Stock Prices

Abstract: Spearheaded by retail traders on the website reddit, the GameStop short squeeze of early 2021 shows that social media embeds information that correlates with market movements. This paper seeks to examine this relationship by using daily frequencies of classified comments and buzzwords as additional factors in a Fama-French three factor model. Comments are classified using an unsupervised clustering method, while past studies have used pretrained models that are not specific to the domains being studied.