Memes are much more than just fun distractions that entertain; they significantly influence the decisions and actions of investors on platforms like Reddit. In a recent study called ‘Are Memes a Sideshow: Evidence from WallStreetBets’, a direct correlation was discovered between trading behaviours and online meme interactions.
Memes are often utilised as funny devices to help cope in situations when businesses report unsatisfactory earnings, subsequently leading to a spike in meme activity. This results in increased virality and involvement in discussions revolving around individual stocks.
The study found that stocks that are frequently featured in memes see substantial social media engagement, which often prompts investors to keep hold of them. In fact, retail investors are less likely to sell shares that are highly talked about in memes, thereby slowing down the stock market’s reaction to unfavourable news.
The era of concocting counterfeit news articles to manipulate and quickly sell stocks seems to be dwindling. In the present, all that’s required to stir the stock market is a compelling meme.