The impact of Robinhood traders on the volatility of cross-listed securities

David Y. Aharon, Ahmed S. Baig and Jared DeLisle

Research in International Business and Finance, 2022, vol. 60, issue C

Abstract: This study investigates the impact of Robinhood investors' participation on the volatility of American depository receipts (ADRs). Using data on Robinhood account holdings in 382 ADRs from 33 countries around the globe, we show that their activity amplifies the cross-listed securities volatility. While Robinhood investors' involvement has soared in recent years, seemingly supplying additional trading liquidity, this provision appears to be associated with a deterioration of ADR stability. The detrimental effect holds across the COVID-19 period and is not subsumed by home-country pandemic intensity measures. Since the law of one price suggests that increased ADR volatility will negatively impact the underlying stocks in their home markets, our results have important implications for various government and market policy makers as well as for home-country firms considering cross-listing their stocks.

Keywords: ADR; American depository receipts; Volatility; Retail Investors; Commission free trading; Robinhood (search for similar items in EconPapers)
JEL-codes: G01 G12 G15 G18 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:60:y:2022:i:c:s0275531922000071

DOI: 10.1016/j.ribaf.2022.101619

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