Retail investors and the stock market: Evidence from Robinhood online broker

Abstract

We study how is the popularity among Robinhood investors related to stock returns, volatility and trading volume for the companies listed on the New York Stock Exchange. Robinhood is an online broker focused on retail costumers, and particularly millenials.

First we investigate which factors can explain popularity among Robinhood investors. We find that for a given week, more popular stocks exhibit positive returns, increased volatility, increased volume and increased ASVI.

We find that during the weeks when stocks are more popular, they exhibit low volatility and high trading volume. Furthermore, high popularity in the current week predicts next week's positive returns, low volatility and low trading volume and positive returns. Our results reveal that popularity is not able to explain contemporary return, but when put together with other control variables it can predict it. We also find that popularity predicts increased trading volume and volatility, as well as the abnormal search volume. Lastly our results showed that popularity are more related to current than future trading activity.