Robinhood is linked to recent events like the stock price of Hertz skyrocketing despite going bankrupt or Kodak jumping 1,000% on news of a pivot to drug manufacturing. By displaying stocks other users are buying/have bought (a simple way of consumerizing stock picking), they’ve inadvertently created a ‘momentum algorithm’ that, simply by displaying popularity more people buy and drive the price up.
See also:
- Money Stuff that suggests how COVID-19 has created millions of bored people looking for entertainment by betting on stocks
Links to this note
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Psychology Overwhelms Fundamentals in the Short Run
In discussing market changes, Howard Marks, remarks that psychology overwhelms fundamentals in the short run as the reason why markets can appear irrational. This is a neat way of holding both the idea that investors are rational and markets are irrational simultaneously.