Author(s): Torres, José Luís Barateiro Marques Da Mata
Date: 2022
Persistent ID: http://hdl.handle.net/10362/142190
Origin: Repositório Institucional da UNL
Project/scholarship: info:eu-repo/grantAgreement/FCT/6817 - DCRRNI ID/UID/ECO/00124/2013/PT;
Subject(s): Efficient market hypothesis; Stock returns; Trade restrictions; Meme stocks; Event studies; Abnormal trade volume; Mispricing; Herd behavior
Arguably the biggest discount broker in the world, Robinhood implemented in January 2021 trade restrictions on a selection of popular stocks in social media communities, meme stocks. These weretargeted by retail investors in a coordinated fashion to increase their prices above fair value. We examine the impact of restrictions in restricted and non-restricted stocks, focusing on return and abnormal volume. Our model shows that meme stocks underperform when compared to the market and volatility increases around the event. Additionally, the results point towards the presence of herd behavior among retail investors, whose actions promote mis pricing and market inefficiencies.
