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A note on GameStop, short squeezes, and autodidactic herding: An evolution in financial literacy?

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  • Klein, Tony

Abstract

This note explores a secondary effect of the GameStop short squeeze event and links the exalted focus of retail investors on meme stocks to financial literacy and autodidacticism. From an overview of stylized facts about the short squeeze of GameStop based on high frequency data, short interest, and key figures of related derivatives, it is shown that these financial concepts are reflected in keyword searches across multiple platforms. This self-education with regard to financial terms, keywords, and products and the understanding of basic market speculation mechanisms such as short sales plays a significant role for the influx of retail investors.

Suggested Citation

  • Klein, Tony, 2022. "A note on GameStop, short squeezes, and autodidactic herding: An evolution in financial literacy?," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321002890
    DOI: 10.1016/j.frl.2021.102229
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    References listed on IDEAS

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    1. French, Declan & McKillop, Donal, 2016. "Financial literacy and over-indebtedness in low-income households," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 1-11.
    2. Daniel Bradley & Jan Hanousek & Russell Jame & Zicheng Xiao, 2021. "Place your bets? The market consequences of investment advice on Reddit’s Wallstreetbets," MENDELU Working Papers in Business and Economics 2021-76, Mendel University in Brno, Faculty of Business and Economics.
    3. Klein, Tony, 2017. "Dynamic correlation of precious metals and flight-to-quality in developed markets," Finance Research Letters, Elsevier, vol. 23(C), pages 283-290.
    4. Oscar A. Stolper & Andreas Walter, 2017. "Financial literacy, financial advice, and financial behavior," Journal of Business Economics, Springer, vol. 87(5), pages 581-643, July.
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    Citations

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    Cited by:

    1. Gonzalo Bohorquez & John Cartlidge, 2024. "Simulation of Social Media-Driven Bubble Formation in Financial Markets using an Agent-Based Model with Hierarchical Influence Network," Papers 2409.00742, arXiv.org.
    2. Suchanek, Max, 2024. "Social interactions in short squeeze scenarios," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 898-919.
    3. Li, Shi, 2022. "Spillovers between Bitcoin and Meme stocks," Finance Research Letters, Elsevier, vol. 50(C).
    4. Nobanee, Haitham & Ellili, Nejla Ould Daoud, 2023. "What do we know about meme stocks? A bibliometric and systematic review, current streams, developments, and directions for future research," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 589-602.
    5. Weiss-Cohen, Leonardo & Newall, Philip Warren Stirling & Ranyard, Rob & Ayton, Peter & Clacher, Iain, 2023. "Revalidating Fernandes et al.’s 2014 financial literacy scale in response to ongoing legislative and behavioral changes," OSF Preprints 493x7, Center for Open Science.
    6. Yousaf, Imran & Pham, Linh & Goodell, John W., 2023. "The connectedness between meme tokens, meme stocks, and other asset classes: Evidence from a quantile connectedness approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 82(C).
    7. Banerjee, Ameet Kumar & Sensoy, Ahmet & Goodell, John W. & Mahapatra, Biplab, 2024. "Impact of media hype and fake news on commodity futures prices: A deep learning approach over the COVID-19 period," Finance Research Letters, Elsevier, vol. 59(C).

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    More about this item

    Keywords

    Financial literacy; Short squeeze; GameStop; Reddit; Meme stocks;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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