Who rules whom? An economic sociological perspective on the relationship between the number of investors and the stock market performance

The development and spread of digital investment technologies contributes to the growing popularity of the stock market among the general population. As more ordinary people begin investing, their influence on the stock market can be expected to increase. This research tests the relationship between the number of retail investors and the performance of the stock market. Theoretical framework of the study is built upon the network approach and social studies of finance. The analysis is conducted on the Moscow Exchange data for the period from January 2012 to December 2023 via Granger causality tests and ARDL modelling. The findings of the analysis suggest the number of investors exert no significant influence on the performance of the MOEX Russia and the RTS stock market indices. Rather, the market’s performance appears to have a positive impact on the number of retail investors, albeit only during the period from 2018 to 2023. This relationship is explained via (1) the herd behavior of investors, (2) the influence of digital technologies as market devices, and (3) the background of respective time period.