I've seen a fair number of articles recently (example) describe the GameStop short squeeze as a victory for the little guy over Wall Street. They claim that it was a bunch of small individual investors on Reddit's wallstreetbets forum who kept buying GameStop stock, which triggered a short squeeze, which resulted in heavy losses for some hedge funds who were shorting the stock.

Many of the wallstreetbets traders use the Robinhood brokerage, and one article says that Robinhood users have an average account size of $1K to $5K, which wouldn't be enough to generate substantial moves in the stock market.

Perhaps the small investors could have driven GameStop stock from single digits to double digits, but did they really drive it to almost $500 per share so that the company was worth $34 billion? Is there any evidence that the short squeeze may have also been driven by buying from larger institutional investors who weren't shorting GameStop?

  • 2
    I'm not totally sure about the details, but if I were to guess, it would be the fact that several high profile individuals (including Elon Musk, Chamath Palihapitiya, Mark Cuban, and others) have shouted out the reddit "movement" that led to a huge market shift that reddit alone may not have been able to cause. Feb 5 at 20:05
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    What would an answer to this question look like? There were plenty of reports of Redditors investing far larger amounts (six digits), and part of the squeeze's premise was that short-selling hedge funds would be forced to buy at the higher price. So the idea that all the purchases were in the sub $5k range seems to be a strawman.
    – Oddthinking
    Feb 6 at 4:26
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    A single point of reference: A week ago or so, my son who is not active on Reddit but who actively trades in stocks, shouted "Elon Musk!!!" from the next room. I asked "What did he do now?", to which he started talking about GameStop. Despite not being a wallstreetbets member, he did buy some GameStop stock. He later sold it for a nice profit. Once the word got out regarding this 21st century equivalent of the tulip bulb craze, multiple investors jumped in, some small, some large, but mostly not a part of wallstreetbets. Feb 7 at 16:34
  • I think the question may need some slight clarification to be answerable. If the question were, "Was the GameStop short squeeze primarily driven by the volume of buying by small individual investors?" I think there is some pretty compelling data to suggest it was not. But if "caused" could include small investors' chatter and trades catlyzing institutions and others to buy (which is how I read it now), I'm not sure it's possible to have much certainty one way or another.
    – Jaydles
    Feb 23 at 18:09

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