The Equity Market Implications of the Retail Investment Boom

We quantify the equilibrium impact of retail traders on the U.S. equity market within a structural model of asset demand. Estimating investor-specific demand curves, we find that Robinhood traders are fundamentally distinct from all other investors, including other households: their demand is the most elastic and tilts most strongly toward volatile and microcap stocks. Each dollar invested through Robinhood generates more than five dollars in aggregate equity repricing, exceeding hedge funds, other households, and all other investor types. We decompose the cross-sectional variation in stock returns during Robinhood’s growth surge in 2020 into investor-specific components and find that shifts in Robinhood traders’ latent demand drove 11% of small-cap return volatility despite their negligible aggregate wealth share. To explain these demand shifts, we show that Robinhood traders are the only investor group whose latent demand is well explained by attention proxies: their demand exhibits a V-shaped response to past returns and rises sharply with trading volume. Our findings suggest that the growth of retail trading platforms represents a fundamental shift in the composition of equity demand with equilibrium consequences disproportionate to retail investors’ share of aggregate wealth. This paper was accepted by Lukas Schmid, finance. Funding: P. van der Beck acknowledges financial support from the Swiss National Science Foundation. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2025.04854 .