Highly Regarded Investors? Mining Predictive Value from the Collective Intelligence of Reddit's WallStreetBets

In 2021, the Reddit community of WallStreetBets (WSB) started making headlines in the mainstream media as a source of risky investment ideas called YOLOs, and meme stocks such as GameStop. The community has become infamous for its use of vulgar language, memes, and unorthodox investment strategies. While previous research has explored the community in terms of language and social dynamics, this work sheds light on the extraction of predictive value from investment advice shared on WSB to investigate Reddit's collective intelligence. We evaluate more than 1.6 million posts contributed over 4.5 years, extracting thousands of investment recommendations, which are matched and benchmarked with corresponding stock market data. To analyse and assess their value, we investigate multiple machine learning models, evaluating their effectiveness on multiple time windows under different market conditions, and exploring their latent spaces. When predicting the success of a new post, we view it within the context of the WSB community's discussions and the stock market data of the same day. Our best model's predictive performance on stock market data outperforms the S&P 500 index and other traditional investment strategies by a significant margin. We conclude that amateur retail traders posting on WSB can act as an intelligent crowd and constitute a valuable source of investment advice. Our findings yield generalizable insights on how the collective intelligence of online communities can be extracted and utilized.