Latest news with #Robinhood
Forbes
a day ago
- Business
- Forbes
6 Minutes Of Retail Trader Research Drives 20% Of Stock Market Volume
New research reveals retail investors spend just six minutes researching stocks before trading, yet their collective behavior is increasingly driving market movements as trading volumes surge and buy-the-dip strategies become more aggressive. The stereotype of the hurried retail investor making split-second decisions based on little more than a hunch has been confirmed by groundbreaking academic research. A study by Jeffrey Wurgler, Nomura Professor of Finance at NYU Stern, and his colleagues found that the median retail investor spends just six minutes conducting internet-based research before making a stock trade. This finding takes on new significance as retail investors have become increasingly bold in their market behavior. Recent data from J.P. Morgan shows individual investors net bought a record $4.7 billion worth of equities in a single day during April's market selloff, the highest daily inflow in a decade. This "buy-the-dip" mentality has strengthened dramatically since 2022, marking a behavioral shift from the panic selling witnessed during the March 2020 market crash. The influence of individual investors has grown substantially, with retail trading now accounting for roughly 20% of total market volume. This is double the levels seen a decade ago. Trading app downloads surged during the pandemic, with platforms like Robinhood reporting millions of new accounts, while Interactive Brokers recently saw a 44% increase in options orders following market volatility. Wurgler's research, which analyzed eight million rows of browser data from individual investors, reveals troubling patterns in how retail traders conduct research. The study found that investors overwhelmingly focus on price charts rather than fundamental analysis, with the most common lookback period being just a single day. "It caters to the lowest common denominator of research ability," Wurgler explained in a recent podcast interview. "We understand stocks, we want them to go up. And if we see a picture in which the stock is going up today, well, that's more satisfying than something that's flat or something that's slightly down." This focus on short-term price movements is particularly striking given that most investors in the study held their positions for several weeks. The disconnect between research timeframe and holding period suggests a fundamental misalignment in investment approach. The research uncovered another significant finding: Yahoo Finance dominates retail investor research, serving as the primary information source for millions of traders. This concentration creates what Wurgler calls a feedback loop, where the information presented on the platform's default pages drives collective investor behavior. "By far the most commonly used investment data website is Yahoo Finance," Wurgler noted. "So depending on what is served to you on Yahoo Finance, that's served to pretty much everybody, or at least millions of people." This phenomenon has profound implications for market dynamics. When millions of investors rely on the same information source and default settings, it can amplify certain market trends and create herd-like behavior. The study also confirmed what many market observers have long suspected: retail investors are heavily influenced by news events and brand recognition. Major corporate announcements, like Apple's iPhone launch during the study period, generated massive spikes in investor research activity. This pattern has only intensified with the rise of social media. While Wurgler's data predates platforms like Reddit and TikTok, the underlying behavior (following salient news and recognizable brands) remains consistent. The 2021 meme stock phenomenon with GameStop and AMC as well as the meteoric rise of Pump Fun demonstrated how social media can amplify these tendencies. Perhaps most concerning is what retail investors don't research: risk statistics, financial fundamentals, and proper diversification metrics. The study found that sophisticated risk measures like beta, cash flow analysis, and balance sheet examination are "almost nonexistent" among individual investor research habits. "Most people come into an investment with a rough assessment of risk based on how much upside they see in some kind of informal way," Wurgler observed. This informal approach to risk assessment can lead to poorly diversified portfolios and unexpected losses. The growing influence of retail trading has forced institutional investors to adapt their strategies. Professional money managers now must consider not just fundamental analysis but also what might capture retail investor attention. This dynamic echoes John Maynard Keynes' famous observation about markets being a beauty contest where participants try to predict what others will find attractive. Today's version involves predicting what will trend on financial social media or appear prominently on retail trading platforms. The evolution of retail investor behavior is perhaps most evident in how they respond to market volatility. During the March 2020 crash, individual investors largely sold off their positions, showing a 75% correlation between their flows and negative market performance. Today's retail investors display the opposite behavior. The April 2024 market selloff, triggered by sweeping tariff announcements, saw retail investors split their record $4.7 billion in purchases almost evenly between individual stocks ($2.3 billion) and ETFs ($2.4 billion). Nvidia alone attracted $913 million in net buying, while S&P 500-tracking ETFs received $900 million in inflows. This shift suggests retail investors have grown more confident in their ability to time market bottoms, despite spending minimal time on research. The combination of quick decision-making and aggressive dip-buying creates a powerful force that can amplify both market recoveries and potential losses. The surge in retail trading represents both opportunity and challenge for market efficiency. On one hand, increased participation democratizes investing and provides more capital to growing companies. On the other hand, the research suggests many retail investors may lack the tools and knowledge for effective investment decision-making. The question for regulators and platform providers is whether to nudge investors toward more comprehensive research or accept that quick, intuitive decisions are simply part of modern market behavior. Wurgler's ongoing research aims to determine whether more research actually leads to better investment outcomes. The preliminary indication suggests the relationship may be flat or even negative, potentially because investors who research more also trade more frequently, a pattern associated with underperformance. As retail trading continues to grow, understanding these behavioral patterns becomes crucial for market stability and investor protection. The six-minute research window may be brief, but its collective impact on markets is anything but small. The rise of retail trading represents a fundamental shift in market dynamics, one where traditional fundamental analysis competes with social media trends and brand recognition for investor attention. For better or worse, the six-minute investor is here to stay.
Yahoo
a day ago
- Business
- Yahoo
SEC drops Binance lawsuit
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. The Securities and Exchange Commission dropped its 2023 lawsuit against Binance, its U.S. affiliate and its founder Changpeng Zhao Thursday, continuing its trend of vacating lawsuits against cryptocurrency firms filed by the SEC of yesteryear. This brings to an end a nearly two-year legal battle, in which the SEC accused the crypto exchange of illegally serving high-value U.S. customers and commingling and diverting customer funds. Under the leadership of then-Chair Gary Gensler, the SEC filed numerous lawsuits against crypto firms such as Binance, accusing them of, among other things, offering unregistered securities. But the SEC of today, led by Chair Paul Atkins, has done an about-face, dropping cases against Coinbase, Kraken, Ripple and Robinhood, and hosting industry roundtables with its new crypto task force. 'The dismissal of the SEC's case against Binance is a landmark moment. We're deeply grateful to Chairman Paul Atkins and the Trump administration for recognizing that innovation can't thrive under regulation by enforcement. The U.S. is back - leading from the front in the future of blockchain,' a Binance spokesperson told Banking Dive via email. A spokesperson for the exchange's U.S. affiliate, said the dismissal 'confirm[s] what we have always known—that the company did not violate U.S. securities laws.' The dismissal, a major milestone, allows to 'work on restoring our relationships that were impacted by the SEC,' the spokesperson said. The SEC had no further comment beyond its litigation release. Prior to the SEC lawsuit, Binance and Zhao were sued by the Commodity Futures Trading Commission over compliance 'evasion,' and in late 2023 the Justice Department charged Zhao with violating the Bank Secrecy Act. He pleaded guilty to the charge, paid a $50 million fine and was sentenced to four months in federal prison in 2024. The abandonment of the SEC's lawsuit against Binance comes one week after the international crypto exchange, the world's largest by trading volume, announced it would list World Liberty Financial USD on May 22. WLF is owned by the family of President Donald Trump, and was created two months before Trump won the presidential election. Trump, a former crypto skeptic, is involved in the crypto sector through WLF and the more recent launch of his meme coin. He has laid out his intentions to make the U.S. 'the crypto capital of the planet' through executive orders and the nomination of several crypto-friendly regulators, including Atkins. Amanda Fischer, policy director and chief operations officer of financial policy group Better Markets, said that the SEC ending its legal pursuit of Binance 'marks a new low in the SEC's already disgraceful recent history of surrendering in crypto cases, regardless of the merits and even when the agency is winning in court.' 'By dropping all charges notwithstanding prevailing in the early stages of the litigation, the SEC is dangerously sullying its own reputation,' Fischer said. 'In an almost comical admission, Binance's own Chief Compliance Officer confessed in private chats that the firm was 'operating as a fking unlicensed securities exchange in the USA bro.' And while the Department of Justice's previous case against Binance and CZ resulted in a minimalist charge not nearly commensurate with the harm caused, it is even more shocking that the SEC has surrendered even though the Binance founder has already admitted to myriad violations and spent time in jail for those crimes.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
Robinhood's Global Push: Is Now the Time to Buy HOOD Shares?
Robinhood HOOD is expanding its desktop trading platform, Robinhood Legend, to the U.K., aiming to broaden its appeal among retail investors seeking more advanced trading tools. The move comes after the company introduced the platform to its U.S. customers in October Legend is a powerful, customizable, browser-based desktop trading platform designed specifically for active traders, available at no additional cost to all account holders. The platform comes with advanced charting, real-time data, synced layouts and powerful analysis tools. Users can trade U.S. stocks and options with low fees, manage positions easily and personalize their setup across multiple monitors for seamless, professional-grade earlier this month, HOOD announced an agreement to acquire Canada-based WonderFi Technologies Inc. in a C$250 million all-cash deal. The transaction aims to deepen the company's presence in the Canadian digital asset market. Besides granting regulatory footing in Canada, the transaction strengthens the company's position in a rapidly growing crypto market. These initiatives align with Robinhood's ambition to become a global player as the company looks to expand its presence beyond the Americas and Europe into the Asia-Pacific region. During its first Investor Day conference in December, the CEO, Vlad Tenev, mentioned that the company will set up a new office in Singapore in 2025, which will serve as HOOD's headquarters for the company plans to launch digital asset trading in Singapore following the completion of its $200 million acquisition of Luxembourg-based Bitstamp, a globally recognized cryptocurrency exchange. The deal will provide Robinhood with essential regulatory approvals, positioning the company to enter Singapore's expanding digital asset market. Robinhood became extremely popular among younger generations in early 2021, riding on the meme stock wave. Nonetheless, since its IPO in July 2021, a lot has happened on the business has evolved from a brokerage firm primarily trading in digital assets to a more mature and diversified entity, striving to widen its market and reach. Looking at the numbers, in 2021, HOOD majorly depended on transaction-based revenues (almost 75% of total revenues) to generate income. In 2024, this came down to nearly 56%. HOOD's 9-Quarter Total Net Revenue Trend Image Source: Robinhood Markets, Inc. Some other initiatives by Robinhood reflect its ambition to become a full-spectrum financial services provider. In March, the company launched Robinhood Strategies, Robinhood Banking and Robinhood Cortex, a suite of new features, to boost the wealth management offerings for its Robinhood Gold members. Further, it launched the prediction markets hub, allowing customers to trade on the outcomes of several major global events. Initially, the hub will be available across the United States through KalshiEX LLC, a Commodity Futures Trading Commission-regulated contracts gained traction when Robinhood launched them in October 2024, just before the U.S. Presidential elections. Similarly, Interactive Brokers IBKR has been actively expanding its event contract offerings to capitalize on rising demand. In April, it launched prediction markets in Canada. Like HOOD, it first introduced event contracts in October 2024, starting with the U.S. election in February, Robinhood acquired Gainesville, FL-based TradePMR, a custodial (having $40 billion in assets under administration) and portfolio management platform specializing in services for Registered Investment Advisors. The company gained immediate credibility and resources to cater to wealthier investors seeking advisory solutions. By foraying into the advisory space, the company now directly competes with established players like Charles Schwab SCHW and Fidelity in July 2024, Robinhood acquired Pluto Capital Inc. With the integration of Pluto's advanced capabilities, the company is set to revolutionize the investment experience for its users. Also, as part of a diversification effort, HOOD launched a credit card (expanding in the consumer finance space).Initiatives to change the revenue mix provide HOOD with solid leverage. The company intends to become a one-stop shop for building generational wealth. Sales Estimates Image Source: Zacks Investment Research Robinhood's focus on the cryptocurrency space, through increased tokenization, enhanced platform capabilities and expansion into EU markets, is expected to drive greater cost efficiency and revenue growth. The company is actively pursuing Markets in Crypto-Assets Regulation (MiCA) licenses, which would enable it to offer crypto services across the European Economic Area, expanding its reach to 27 planned acquisitions of Bitstamp and WonderFi align with this broader strategy. Bitstamp's core spot exchange, offering more than 85 tradable assets, will significantly strengthen Robinhood's crypto product suite. Meanwhile, WonderFi brings two of Canada's leading regulated crypto platforms — Bitbuy and Coinsquare — with more than C$2.1 billion in assets under custody. These acquisitions will enable Robinhood to provide trading, staking and custody the platform diversifies and enhances its offerings, Robinhood's cryptocurrency revenue is well-positioned for growth, supported by increasing investor interest in crypto as both a return-generating and diversification tool. Currently, Robinhood supports several major cryptocurrencies — Bitcoin, Ethereum, Dogecoin, Litecoin, Solana and Toncoin. Crypto Revenue Quarterly Trend Image Source: Robinhood Markets, Inc. In 2024, Robinhood announced a share buyback plan (for the first time) to repurchase up to $1 billion of its outstanding common stock. In April, the company increased its existing authorization by $500 million to $1.5 billion. As of April 30, 2025, approximately $833 million worth of shares remained available for repurchase. HOOD plans to complete the remainder of its total authorization over the next roughly two is on solid ground, with significant cash reserves. As of March 31, 2025, it reported cash and cash equivalents of $4.42 billion. Robinhood operates in a highly regulated industry and falls under the scrutiny of numerous authorities. This, thus, exposes the company to regulatory risks, resulting in hefty fines and restrictions that may affect its profitability. In March 2025, Robinhood's units agreed to pay $26 million to settle Financial Industry Regulatory Authority ('FINRA') allegations for failing to respond to red flags about potential misconduct and not verifying the identities of thousands of January 2025, the company agreed to pay a $45 million fine for violating more than 10 securities law provisions. In September 2024, the company faced a $3.9 million penalty to settle crypto withdrawal failures. In 2023, the company faced defeat in proceedings at the Massachusetts Supreme Judicial Court regarding the supervision of product features and marketing strategies and paid a fine of $7.5 fines have made investors cautious about the company's operations and internal control procedures. HOOD shares are having an impressive run on the bourses. This year, the stock has soared a whopping 71.7%, significantly outpacing the industry's growth of 7.6%. Also, it has fared better than its peers, Schwab and Interactive Brokers. HOOD's YTD Price Performance Image Source: Zacks Investment Research Over the past month, the Zacks Consensus Estimate for 2025 has remained unchanged at $1.22, while for 2026, it has been revised upward to $1.47. This reflects a bullish sentiment among analysts. Estimate Revision Trend Image Source: Zacks Investment Research The Zacks Consensus Estimate for HOOD's earnings implies 11.9% and 20.5% year-over-year growth in 2025 and 2026, the solid price performance, HOOD shares are currently trading at a massive premium to the industry. The company has a forward price-to-earnings (P/E) of 48.23X compared with the industry average of 13.57X. Price-to-Earnings F12M Image Source: Zacks Investment Research Similarly, Schwab and Interactive Brokers have forward P/E ratios of 19.06 and 28.83, respectively. Thus, HOOD is expensive compared with its peers, Robinhood's global expansion, strategic acquisitions, new product launches and diversification efforts will likely help it grow its market share and presence. Rising investor demand for cryptocurrency and solid liquidity are other concerns have been raised regarding increased regulatory oversight due to the blurred distinction between gambling and trading in the prediction markets hub. Also, foraying into the banking business amid intense competition keeps investors cautious about its success. Uncertainties related to tariffs pose a near-term risk. Hence, investors must keep an eye on macro developments and other headwinds and see how Robinhood is navigating the challenging times. Thus, the stock is a cautious bet for long-term investors, but they should be prepared for short-term present, Robinhood carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report Interactive Brokers Group, Inc. (IBKR) : Free Stock Analysis Report Robinhood Markets, Inc. (HOOD) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
Robinhood's Sports Prediction Markets Are a Hook for Wider Play
As Robinhood has expanded its sports prediction markets, adding Indy 500 and French Open event swaps to its arsenal this month, the U.S. gambling industry establishment has remained on alert. Robinhood has more than 20 million monthly active users across its full suite of financial products, and CEO Vlad Tenev has frequently talked up the new sports prediction market endeavor. Tenev told analysts on April 30 the company had facilitated about 500,000 sports-related transactions. More from ESPN Bet Faces Make-or-Break Year for $2 Billion Disney-Penn Deal Sports Prediction Market Regulator Exits With Agency in Flux DraftKings the Exception to Sports SPACs' Dire Track Record Chris Grove, partner emeritus at Eilers & Krejcik Gaming, called the company 'a credible threat to the sports betting status quo' in a recent email to Sportico, citing its size and technology chops. But the fine details of Robinhood's dealings, some of which have not been publicly reported, underline how a financial technology company better known for stock market trading sees sports as a gateway for users to adopt other products. 'It's not just about the trading of these events, it is about the engagement that it [generates],' JB Mackenzie, VP of Futures and International, said in a video interview. 'When you create a product that has intrigue, such as sports prediction markets, it allows users the opportunity to then look at other asset classes that they may be interested in. What we've seen is that is exactly what occurs … they'll look at a sports event contract, but then also they look at crypto, they'll also look at equities or options trading.' That is a different mission from sportsbook operators such as DraftKings and FanDuel, which are nonetheless closely monitoring the rise of sports event futures because of their growing popularity and resemblance to traditional betting. DraftKings and FanDuel have not expressed interest in user acquisition for the sake of providing people with other asset management services. To the extent they are using sports wagering to drive users to another product, the destination sportsbooks have in mind is the revenue bonanza of mobile casinos in states that have legalized iGaming. Robinhood's strategy also contrasts its partner Kalshi, which owns the exchange underpinning Robinhood's in-app event futures trading capabilities. Kalshi's entire business rides on the ability to scale prediction markets. Robinhood's does not. In fact, Robinhood is lowering its revenue ceiling for prediction markets, seeking instead to reduce risk by using a third-party exchange rather than buying or building its own. Robinhood does not directly pay Kalshi for the right to host its exchange, Mackenzie said, and it only earns revenue from sports markets by charging $0.01 per dollar traded. Kalshi tacks on additional user fees in a separate process. Mackenzie said Robinhood made a cost-focused choice not to create or acquire its own exchange. purchased North American Derivatives Exchange Inc. in 2022 and now offers sports event futures there. 'Acquiring an exchange is a very difficult process, to be perfectly blunt,' Mackenzie said. 'There's probably less than six that are out there. So, acquiring one is probably a much bigger decision, and it usually involves a lot of different products outside of just prediction markets.' Robinhood's tie-up with Kalshi is non-exclusive, meaning it does not provide an inherent competitive edge over other financial technology companies that offer investments in varied asset classes. As previously reported by Sportico, Robinhood also takes a slightly different approach toward regulators than Kalshi, albeit one that is still far more aggressive than DraftKings and FanDuel. Kalshi remains live in all 50 states despite fierce legal challenges, but Robinhood is not offering sports contracts in Maryland, Nevada or New Jersey, a company spokesperson said Tuesday. The three states have issued cease-and-desist orders asking unregistered sports prediction markets to shut down, alleging they are illegally offering a gambling service. Robinhood and Kalshi have denied wrongdoing, claiming in court that sports futures are distinct from gambling and that the federal Commodity Futures Trading Commission (CFTC) holds exclusive oversight authority. The issue could eventually make it to the Supreme Court due to the clash of state and federal power. Because it is a trading broker that does not own a prediction market exchange, Robinhood faces fewer potential regulatory actions from the CFTC. The sparsely staffed federal agency that oversees futures trading has recently embraced a hands-off approach to the entire sector, adding to a sense that Robinhood's prediction markets will not face a blanket ban anytime soon. Also, Robinhood was one of the biggest corporate donors to President Donald Trump's inauguration committee, giving $2 million. Kalshi is well-connected with the Trump administration, too, adding Trump's son Donald as an advisor and seeing board member Brian Quintenz nominated to lead the CFTC. Quintenz said this week in a letter to the CFTC that he will step down from Kalshi's board when approved as chairman. If Quintenz is confirmed, he will enter an agency with all four other agency spots unfilled because of recent resignations. This will kneecap the CFTC's regulatory capabilities to monitor companies like Robinhood, departing commissioner Christy Goldsmith Romero said at a Brookings Institution conference Tuesday. 'I think it's difficult if there's one person deciding on what the rules should be,' Romero said. 'It does a disservice to regulation.' Beyond regulatory concerns, whether Robinhood hurts the gambling industry's longstanding business forces remains to be seen. A couple of months ago, executives at several prominent sportsbook operators viewed prediction markets as a possible existential threat, and a spokesperson for the American Gaming Association said in an email Tuesday that the trade group remains concerned. Tribal groups in places such as California, where sports betting is banned or limited outside of Native American operations, remain staunchly against the rise of sports prediction markets. But corporate sports betting operators could have a change of heart. Sporttrade, for example, is requesting the CFTC agree not to take action against it if it lists nationwide futures contracts like Kalshi. Sporttrade is a hybrid case—a prediction market hub that has until now been exclusively overseen by state gaming regulators and officially licensed in Arizona, Colorado, Iowa, New Jersey and Virginia. Meanwhile, DraftKings CEO Jason Robins and Flutter CEO Peter Jackson have gone on record to suggest they could introduce their own futures trading platforms once regulatory questions are resolved. Until then, Robinhood and its fintech peers, which also offer political markets, can run up the score, each with ultimate objectives tailored to their broader businesses. 'We love what we're seeing,' Tenev said on Robinhood's most recent earnings call, 'and it's so early that the potential of this is vast.' Best of Most Expensive Sports Memorabilia and Collectibles in History The 100 Most Valuable Sports Teams in the World NFL Private Equity Ownership Rules: PE Can Now Own Stakes in Teams
CNBC
a day ago
- Business
- CNBC
Watch CNBC's full interview with Robinhood CEO Vlad Tenev from Bitcoin 2025
Vlad Tenev, CEO of Robinhood, joins CNBC's MacKenzie Sigalos at Bitcoin 2025 in Las Vegas to discuss how blockchain a role in the company's future.
