European Central Bank (ECB) researchers have used artificial intelligence (AI) to analyze Reddit posts and how they reflect retail investor optimism or pessimism.
The publication by Fabian Wagner and Julian Metzler drew on a daily retail-investor mood gauge based on over 4 million (out of over 8 million) Reddit posts. The main boards scrutinized were r/wallstreetbets, r/stocks, r/StockMarket, r/investing, r/options, r/CryptoCurrency, r/Bitcoin, r/ethereum, r/CryptoMarkets, plus smaller macro/commodity subreddits including Economics, geopolitics, Gold, Wallstreetsilver, and energy.
The Reddit Retail Investor Sentiment Indicator (R-RISI) aggregates daily negative/positive comments. The indicator was said to “closely reflect major market developments and align with established sentiment indicators while providing higher frequency and more timely signals.”
The authors claim that the indicator provides a tool for analyzing retail investor activity as this sector grows. An updated indicator is available online.
Other sentiment indicators exist, such as the Schwab STAX and StockTwits, but this is the only Reddit gauge. The R-RISI is presented as a monitoring tool and as a way to watch retail mood and crowd behavior in near real time.
