Robinhood Traders Contributed Positively to the Stock Market Amid Pandemic, Study says

Robinhood Financial LLC online app
Robinhood Financial LLC online app

Robinhood, is the hottest online trading app of 2020. This online trader pushed the market’s recovery. Particularly, after adding 1% to the aggregate U.S. stock valuation in the 2nd quarter. According to research by the Swiss Finance Institute, Robinhood traders contributed 20% to the value of small-cap stocks.

Bloomberg first reported the study which revealed the online trading platform made an impact 5 times the size of its total assets in the 2nd quarter.  According to researchers Philippe Van der Beck and Coralie Jaunin, online traders also contributed negatively to the market. They caused a crash during the 1st quarter of the same year by about 0.6%. The findings were first published in SSRN, the scholarly and academic research platform in January 2021.

The price impact of Robinhood traders remains concentrated towards small-cap stocks and the consumer staples industry. They are able to affect the price of some large companies. Primarily, passive investors hold these stocks.

Individual Traders on Robinhood React Sluggishly to Price Changes

Philippe and Jaunin wrapped up the research explaining individual traders’ reactions to price changes are more sluggish.