Questions from Robinhood Trader Reveal “Uninformed Equity-Market Participant”

Questions from Robinhood Trader Reveal “Uninformed Equity-Market Participant”

Researchers at Oklahoma State and Emory University have found that “the popularity of zero-commission brokers has attracted a new type of uninformed equity-market participant that in aggregate has negative effects on market quality.” This according to a recent article in MarketWatch.

The study found that the three most visited topics on the Robinhood platform  FAQ page were:

  • What is the Stock Market?
  • What is the DJIA?
  • What is the S&P 500

The study also found that when some of the Robinhood users were sidelined from trading because of issues on the platform, volatility dipped and both liquidity and ease of trading increased for stocks on the platform. This comes in the wake of the GameStop saga and warnings that rising “noise-trader risk” could feed market volatility.

Clifton Green, a co-author of the study and finance professor at Emory’s Goizueta Business school, said that while he’s not disparaging Robinhood users as a whole, he believes that those who trade very often probably shouldn’t. If not for the GameStop saga, he added, the study might not have been taken seriously: “It’s nice when the world conspires to make your research interesting.”

Green argued that while most Robinhood users may well be buy-and-hold investors, that doesn’t negate the fact that some are moving markets with big bets and trades.