New Subclass of Retail Investors?

How has the market environment changed with the introduction of zero-commission trading and associated interest in trading among many inexperienced users? In their January 2021 paper entitled “Zero-Commission Individual Investors, High Frequency Traders, and Stock Market Quality”, Gregory Eaton, Clifton Green, Brian Roseman and Yanbin Wu examine market implications of growth in trading by a new subclass of retail investors represented by Robinhood users, focusing on January 2020 through August 2020 when the number of Robinhood users becomes very large. They isolate Robinhood user impacts by comparing market behaviors during Robinhood outages (real-time complaints by at least 200 Robinhood users on DownDetector.com) to those during similar times of day the prior week. They rely on the Reddit WallStreetBets forum and lagged trading activity to identify which stocks Robinhood users would have traded during outages. Using hourly (normal market hours) breadth of stock ownership data for Robinhood users from Robintrack (stocks with minimum average ownership 500 and daily minimum owners 50) and associated stock trading data during July 2018 through August 2020 (when the RobinTrack dataset ends), they find that:

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