The popular retail broker Robinhood, and more specifically the website that tracks Robinhood investor activity has recently attracted the attention of Wall Street. The website, known as Robintrack.net, provides insight on the behaviour of the many retail investors who are moving into the stock market in record numbers during the Coronavirus pandemic.
What Hedge Funds are looking to do now is aggregate the Robintrack.net data in order to see what the amateur stock traders tend to do and potentially predict their behaviour in some manner. At the very least, Hedge Funds would be able to incorporate the actions of retail investors into algorithmic systems, potentially shaving off some of the irrationality from the stock market.
Casey Primozic, the founder of Robinhood, has confirmed on a recent Bloomberg Television interview that there are at least a few instances of organisations that he knows personally looking into creating some form of algorithm using the data gleaned from amatuer investor sentiment. The site Robintrack.net does seem to be the most efficient means of accomplishing this.
Up to one quarter of the stock market recently has been retail investors, with an exodus from sports betting and casinos into the next available system of ‘bets’ amatuer investors can make; namely the stock market using an intuitive, easy to use online system such as Robinhood. This move into stocks for an everyday investor might seem disruptive to the overall market mechanics, it is not as disruptive as the numbers suggest. The market is still firmly at the mercy of algorithms and deep pocket firms such as hedge funds and banks.
The name of the game at the big end of town is to polish already successful systems with any and all relevant data they can amass. Retail investor habits can almost certainly improve an AI-based algorithmic trading system, as it would provide insight into how the average investor thinks and reacts to market conditions, and therefore perhaps earn a few more percent a month.
That’s all it takes to make you better than the competition.
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