“We show that when institutions react sluggishly to non-fundamental price changes, the mechanism stifles. Retail demand shocks can have substantial impacts on stock prices,” the pair wrote.
The pair discovered the role of the online trading platform “facilitated by novel fintech solutions” continues to grow. The “extraordinary volatility observed during the pandemic may turn out to be the new normal.”
“The prominent role of Robinhood traders in driving returns evokes concerns about the future role of retail trading in equity markets,” the pair said.
Robinhood Financial LLC launched in 2013. The company soared in popularity amid the Covid-19 pandemic. The online trading platform filed for initial public offering with the Securities and Exchange Commission and raised over $660 million in a Series G funding round. Currently, Robinhood’s worth $11.7 billion as of February 2021. This, of course, is after raising another $3.4 billion in an investment round featuring Ribbit Capital.
