The psychology of the GameStop phenomenon, explained – CNBC

By now, there’s a good chance you’ve heard what’s been happening with GameStop’s stock surge. Majorly simplified: Everyman retail investors are using Reddit to spread the word and help boost the stock price of video game retailer GameStop (as well as some others), causing a few Wall Street hedge funds that had heavily shorted the stock to lose millions.

The Reddit crew are essentially “playing the metagame” — a term used in role-play video games when players strategize outside of the rules of the game, says Joost van Dreunen, who teaches the business of video games at the NYU Stern School of Business.

“Retail investors do the same thing,” van Dreunen says. “It has nothing to do with the fundamentals of the actual GameStop company, they’re just playing the financial metagame.”

And the world can’t look away. So what are the psychological reasons behind the phenomenon? Here, experts offer potential explanations.

People want to feel agency…

The narrative many are promoting about the GameStop frenzy is that small retail investors are sticking it to “big evil Wall Street,” says Kelly Shue, professor of finance at the Yale School of Management.

Though that’s not what is actually happening, the story is applealing because there is a lot of pent up anger and frustration around the power structure that the financial industry perpetuates, says Sarah Newcomb, director of behavioral science at investment research firm Morningstar.

Some users of WallStreetBets (the subreddit community that helped trigger the GameStop