Working Paper: NBER ID: w27866
Authors: Ivo Welch
Abstract: Robinhood (RH) investors collectively increased their holdings in the March 2020 COVID bear market, indicating an absence of panic and margin calls. Their steadfastness was rewarded in the subsequent bull market. Despite unusual interest in some “experience” stocks, their aggregated consensus portfolio (likely mimicking the household-equal-weighted portfolio) primarily tilted towards stocks with high past share volume and dollar-trading volume. These were mostly big stocks. Both their timing and their consensus portfolio performed well from mid-2018 to mid-2020.
Keywords: Robinhood; Retail Investors; Market Behavior
JEL Codes: D9; G11; G4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market downturns (E32) | RH investors' purchasing activity (R20) |
| RH investors' purchasing activity (R20) | Market stabilization (E63) |
| Existing cash balances (G19) | RH investors' purchasing activity (R20) |
| Market conditions (D49) | Subsequent investment decisions by RH investors (G11) |
| RH investors' actions (J15) | Higher Sharpe ratio than the market (G19) |