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.
- Money Stuff that suggests how COVID-19 has created millions of bored people looking for entertainment by betting on stocks
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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.