Return Connectedness between Meme Assets and Market Sectors

Abstract

The goal of this paper is to expand on the research by Yousaf et al. (2022) on the effect that meme stock and meme tokens have on the financial markets. Specifically, the focus will be on the effect that these social media driven securities had on particular sectors of the United States stock market during the time period specified by Yousaf et al. (2022). By taking a vector autoregressive approach when looking into particular stock market sectors, the results suggest that meme stocks and meme securities likely serve as shock transmitters rather than shock receivers. I also find that the retail sector was the most affected by the meme asset bubble, likely because the driving asset (GME) was the stock of the video game retailer GameStop. While the degree to which this occurs differs across the different market sectors, the results are still in line with what was originally proposed by Yousaf et al. (2022). These results would suggest that meme stocks have different effects on different market sectors, providing information that can be used in the construction of portfolios.