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Finfluencers and Dumb Money

25th September, 2023

Published in The Sunday Times on September 24th 2023.


Cast your mind back to 2021 – what events do you recall? 

A mob storming the U.S. Capital? Oprah Winfrey’s interview with Meghan and Harry? Or maybe, Armie Hammer’s alleged cannibal tendencies? 

Outside of investment circles, a possibly less well-known event gripped Wall Street. A so-called short squeeze on the stock of the brick‐and‐mortar retail video game vendor GameStop (GME), caused major financial consequences for certain hedge funds and large losses for short sellers. And less than three years on, Dumb Money, a movie based on the book The Antisocial Network, by Ben Mezrich goes on release this week. 

What is shorting?

Shorting is essentially people borrowing shares, selling them in anticipation of the price going down, and then buying them back – pocketing the difference between the sale price and the repurchase price. GME emerged as one of the most widely shorted companies in the U.S., with more than 100% percent of its public float sold short - a very rare occurrence.

Some prominent hedge funds took heavy short positions. In January 2021, GME shares saw a sudden, and drastic, increase in price. The run‐up was reportedly led by a large increase in trading by retail investors using the Robinhood Financial platform and organised via social media, in particular the WallStreetBets chat forum on Reddit. A number of online, small-time traders made a lot of money, while rich people lost even more. Some film scripts write themselves. 

GameStop madness

As a measure of how all notions of money and value were rendered meaningless during the frenzy, consider the following; in February 2021, with the GameStop share price trading at $91, someone bought thousands of GameStop call options with an $800 strike price and a 2-day expiry. A call option allows the buyer to acquire shares at the strike price, without committing all the funds up front. Those options, costing 87c per share, would expire worthless if GME share price didn’t rise 9-fold in 48 hours. It didn’t – but the idea that someone thought it could, was indicative of the madness.
The GameStop legacy remains unclear. The book inspired by the events refers to them as a David and Goliath short squeeze, where a bunch of internet trolls took down one of the biggest hedge funds - firing a first shot in a revolution that threatened to upend Wall Street. Nearly three years on, little has changed, so that assessment seems misplaced. 

But it’s worth considering the phenomenon of investment advice and social media. Social media has gained great importance in recent years for sharing and acquiring information. Inevitably, this has given rise to a cohort of people who try to lead financial opinion on social media - known as finfluencers. One clear impact of GameStop, beyond providing rich fodder for filmmakers and script writers, has been to prompt research into these finfluencers. A very interesting paper, simply titled “Finfluencers”, written for the Swiss Finance Institute is worth a read. 

The research involved analysing tweets of investment advice from finfluencers that appeared on Stocktwits, and then gauging from subsequent results whether they had demonstrated genuine skill. 

Traditional financial theory would predict that some would show genuine ability to repeatedly beat the market, alongside an even larger cohort that wouldn’t. Using tweet-level data on over 29,000 finfluencers, the paper classified each finfluencer into three major groups: skilled, unskilled, and antiskilled (defined as those with negative skill). 

Most finfluencers are antiskilled

28% of finfluencers were found to have provided valuable investment advice, delivering monthly excess returns of 2.6% on average, while 16% of them were unskilled. The majority of finfluencers (56%) are antiskilled, and following their investment advice yielded monthly abnormal returns of -2.3%. Investing contrarian to the tweets by antiskilled finfluencers yielded better returns, which the authors termed, the “wisdom of the antiskilled crowd”.

The authors found that “the message is more important than the messenger”. People follow finfluencers with similar beliefs. As a result, they live in their own bubbles - predominantly receiving information that confirms their existing beliefs, leading to underperformance.

Investors were far more likely to follow positive finfluencers and tended to shun those who were more negative. Unfortunately, the paper found that negative finfluencers were far more likely to be proven skilful than those who were more positive. 

Most strikingly, unskilled and antiskilled finfluencers had more followers, more activity, and more influence on retail trading, than skilled finfluencers.

Social media-based advice has no place 

There’s much to discuss on this topic, but to do it justice is beyond the scope of a short column. The influence of social media on daily discourse and politics is undeniable. At the risk of being complacent, it seems its power to influence financial decisions should be very limited.

I’m looking forward to watching Dumb Money. Sometimes the underdog does win out against the odds. But I’m not willing to invest my hard-earned capital on it. Neither should you.


Market Data          
Total Return (%) 2018 2019 2020 2021 2022
GameStop -22.1 -50.1 220.1 -54.6 -33.2

Source: Data is sourced from Bloomberg as at market close 31st December 2022 returns are based on total indices in local currency terms, unless otherwise stated.

Gary Connolly is Investment Director at Davy. He can be contacted at or on twitter @gconno1.

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