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From Reddit to Wall Street: the role of committed minorities in financial collective action

Lucchini, L., Aiello, L. M., Alessandretti, L. , De Francisci Morales, G., Starnini, M. & Baronchelli, A. ORCID: 0000-0002-0255-0829 (2022). From Reddit to Wall Street: the role of committed minorities in financial collective action. Royal Society Open Science, 9(4), 211488. doi: 10.1098/rsos.211488

Abstract

In January 2021, retail investors coordinated on Reddit to target short-selling activity by hedge funds on GameStop shares, causing a surge in the share price and triggering significant losses for the funds involved. Such an effective collective action was unprecedented in finance, and its dynamics remain unclear. Here, we analyse Reddit and financial data and rationalize the events based on recent findings describing how a small fraction of committed individuals may trigger behavioural cascades. First, we operationalize the concept of individual commitment in financial discussions. Second, we show that the increase of commitment within Reddit pre-dated the initial surge in price. Third, we reveal that initial committed users occupied a central position in the network of Reddit conversations. Finally, we show that the social identity of the broader Reddit community grew as the collective action unfolded. These findings shed light on financial collective action, as several observers anticipate it will grow in importance.

Publication Type: Article
Additional Information: © 2022 The Authors. Published by the Royal Society under the terms of the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0/, which permits unrestricted use, provided the original author and source are credited.
Publisher Keywords: collective action; coordination dynamics; networks‌; social media
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics
Departments: School of Science & Technology > Mathematics
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