Retail investors and the stock market: Evidence fromRobinhood online broker

Abstract

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

First we investigate which factors can explain popularity among Robinhood investors. Wefind 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 andhigh trading volume. Furthermore, high popularity in the current week predicts next week’spositive returns, low volatility and low trading volume and positive returns. Our resultsreveal that popularity is not able to explain contemporary return, but when put togetherwith other control variables it can predict it. We also find that popularity predicts increasedtrading volume and volatility, as well as the abnormal search volume. Lastly our resultsshowed that popularity are more related to current than future trading activity.