Memes on social media often embody humor but may not inherently carry substantive content. This study delves into meme images' prevalence on investor social media (i.e., WallStreetBets) and examines their influence on financial markets. We find a strong positive association between meme activities and negative earnings surprises. This pattern is consistent with investors using memes to cope with adverse market outcomes. However, posts containing memes are not a sideshow, as they lead to a surge in virality and engagement in the discussion at the stock level. Employing large language models, we show the heightened engagement possibly links to amplified fanaticism and a sense of rebelliousness evoked by the content. When faced with negative earnings news, highly memed stocks tend to receive more social media activity, often encouraging investors to hold onto them. Additionally, retail investors place fewer selling orders of highly memed stocks, which seem to delay the market's response to adverse financial disclosures.
<aside> <img src="/icons/groups_gray.svg" alt="/icons/groups_gray.svg" width="40px" /> Coauthored with Zhi Da Bill Qiao
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<aside> <img src="/icons/save_gray.svg" alt="/icons/save_gray.svg" width="40px" /> Download: WP
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