Essays on Meme Stocks

Unpacking the Meme Stocks: Market Disruptors or Speculative Bubbles?: This paper examines the characteristics and market impact of extreme volume spikes in Meme stocks compared to matched controls, using data from 2018–2023. Meme spikes are defined by large, short-lived surges in trading volume (median Z-score = 13.2) and coincide with sharp increases in realized volatility (mean post-spike increase = +34%). Volatility peaks within 1–3 days post-event and remains elevated for up to 10 days. Using variance ratio (VR) tests, we reject the random walk hypothesis for Meme stocks (VR = 0.62 at q = 10), while control stocks remain closer to equilibrium (VR = 0.71). Event-study regressions based on CAPM-adjusted returns reveal cumulative abnormal returns (CARs) peaking at +1.12% over ±10 days (t = 3.21), followed by rapid reversion. Median CARs revert within one day, confirming that gains are highly skewed and short-lived. Post-spike Sharpe, Sortino and Calmar ratios remain low; bootstrapped intervals confirm no statistically meaningful advantage for Meme stocks. Risk-adjusted outcomes are confirmed through bootstrapped confidence intervals and difference-in-differences estimators. Fama-French three-factor regressions show no persistent alpha once market exposures are controlled. Finally, regression models of return predictability reveal that pre-spike volatility forecasts short-term CARs within the Meme group (β = 10.17, Adj. R² = 0.36), but not in controls. The combined evidence shows that Meme spikes are transient, sentiment-driven episodes with limited predictive structure and no persistent valuation effects.

Beyond the Hype: The Financial Reality of Meme Stocks: This paper examines whether Meme firms exhibit persistent deviations in financial policies or gradually align with conventional corporate finance norms. Using panel data from 2009 to 2023, we compare Meme-designated firms to matched Control and S&P 500 peers across capital structure, liquidity, profitability, investment behaviour and riskiness. Descriptive statistics indicate that Meme firms issued 7.7% equity on average over the period, compared to –5.6% for Control sample and –12.4% for S&P 500. However, regression-adjusted estimates reveal a post-2020 reversal in equity issuance behaviour among Meme firms (MemeGroup × MemePeriod = –18.03%, p<0.01), distinct from broader market trends. Leverage increased disproportionately among Meme firms post-2020 (+12.18%, p<0.01), but the effect attenuates after conditioning on size, debt issuance and profitability. Meme firms held higher cash balances throughout the sample (+19.82%, p<0.01), yet uniquely reduced liquidity in the Meme period (–3.67%, p<0.01). Profitability was continually and structurally lower (–15.75%, p<0.01), with no evidence of post-period convergence. R&D and Capex declined somewhat among Meme Stocks post-2020 despite elevated pre-period levels, consistent with liquidity constraints and capital reallocation (R&D: -1.31%, p<0.01; Capex: -1.51%, p<0.01). Z-score regression results confirmed persistent financial fragility, only partially mitigated over time, however, it was based on financial fundamentals, not Meme designation per se. Overall, the results suggest that while observable convergence occurs in selected policy variables, financial decisions among Meme firms continue to reflect firm-level fundamentals rather than classification status or speculative market conditions.