Does r/wallstreetbets predict tomorrow? Mostly no
Turn WSB chatter into a daily per-ticker sentiment signal and test it against next-day returns on a point-in-time S&P 500 universe. Out-of-sample Sharpe is 0.29 against buy-and-hold's 0.94, and it fails the Deflated-Sharpe hurdle.
00Overview
Social-media sentiment signals are easy to make look profitable and hard to make honest. The difference is point-in-time data and multiple-testing correction. This project does both: a per-ticker WSB sentiment signal, tested against next-day returns on a survivor-bias-free S&P 500 universe.
Out-of-sample Sharpe
01Method
- Reddit ingest via Pushshift / PRAW (offline), scored with a finance-augmented VADER lexicon (no transformers).
- A point-in-time S&P 500 constituent set, so there is no future-survivor selection.
- An as-of prior-close cutoff and signal.shift(1), with a train-only scaler and a walk-forward purge and embargo.
- Deflated Sharpe, Probabilistic Sharpe, PBO via CSCV, and HAC (Newey-West) t-stats.
02The honest finding
After a grid search, the in-sample edge largely decays out of sample after costs and the model returns signal_has_edge = False. The Deflated Sharpe (0.26) and the HAC p-value (0.79) both fail their hurdles. What survives is contemporaneous attention-return feedback, not forecasting power.