The equity market implications of the retail investment boom

This paper quantifies the impact of Robinhood traders on the US equity market. Within a structural model, we estimate retail and institutional demand curves and derive aggregate pricing implications via market clearing. The inelastic nature of institutional demand allows Robinhood traders to have a substantial effect on stock prices. Despite their negligible market share of 0.2%, Robinhood traders account for 10% of the cross-sectional variation in stock returns during the second quarter of 2020. Furthermore, without the surge in retail trading activity the aggregate market capitalization of the smallest size quintile of stocks would have been 25% lower