How did retail investors respond to the COVID-19 pandemic? The effect of Robinhood brokerage customers on market quality

Michael S. Pagano, John Sedunov and Raisa Velthuis

Finance Research Letters, 2021, vol. 43, issue C

Abstract: Using data on stocks held by individual investors at retail brokerage firm Robinhood, we document that these investors are actively engaged in both momentum and contrarian trading strategies. In response to the increased volatility and uncertainty in financial markets due to the COVID-19 pandemic in March 2020, we find that retail investors reduce momentum trading and increase contrarian trading activity during the initial phase of this crisis. We also find that the impact of Robinhood investors on several measures of market quality varied depending on market conditions, coinciding with better market quality during less-stressful periods and worse market quality during the early weeks of the pandemic in the U.S.

Keywords: COVID-19 pandemic; Financial markets; Individual investors; Retail trading; Herding; Robinhood; Robintrack (search for similar items in EconPapers)
JEL-codes: G01 G14 G41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321000271

DOI: 10.1016/j.frl.2021.101946

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