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There has been speculation that retail investors have been behind recent buying momentum in the stock market, such as the below excerpt from Andrew Ross Sorkin's daily newsletter 'Deal Book' (published June 15th). Is there a way to determine the approximate impact of retail investors on a particular stock or a market index? Or is this just speculation and hearsay?

Seasoned investors have been cautious about the stock markets in recent weeks, puzzling at the disconnect between the fragile economy and rapidly rising indexes. Wall Street increasingly thinks the rally is driven by retail investors, particularly bored bettors looking for action.

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  • This question should be revisited today. For readers in the future: Google 'wallstreetbets gamestop short squeeze' to see why
    – user253751
    Jan 28, 2021 at 18:36

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It is probably freely invented, because it sounds good and gives clicks.

Here is a recent articel from FORBES, where they write about Barclay research that looked into exactly that: "are retail Robinhood investors moving the markets?": https://www.forbes.com/sites/sergeiklebnikov/2020/06/12/no-the-market-is-not-rallying-because-of-robinhood-traders-barclays-says/#1b19cce33fbb

It concludes that in the contrary, they stick out for in average worse market timing than other investors, and for losing more than they are gaining by mis-timing the markets.
It also shows that their impact by volume is negligible.

[my markups in bold:]

No, The Market Is Not Rallying Because Of Robinhood Traders, Barclays Says

The research “casts doubt on the idea that retail holdings are the cause of market returns,” according to Barclays analyst Ryan Preclaw.

The idea that new investors using zero-cost brokerage firms like Robinhood were driving up the market has become a popular narrative on Wall Street. “Since March 2020 we have seen the opposite of the conventional wisdom—all else equal, more Robinhood customers moving into a stock has corresponded to lower returns, rather than higher,” Preclaw wrote.

Barclays’ analysis found that for all the Robinhood investors cashing in on the stock market’s rebound over the past few months, just as many are getting it wrong and losing money: Overall, Robinhood traders’ top picks are underperforming

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  • Based on Barclay's study of Robinhood investors, it concluded that "there's “no clear relationship” between retail investors adding shares and S&P 500 index moves." That's valid. The specious assumption is the title, "No, The Market Is Not Rallying Because Of Robinhood Traders, Barclays Says." Institutions make up the majority. Then there are all of the other full service and discount brokers. The daily percent of volume by Robinhood traders is a nothing burger. The Forbes article is flawed and deceptive.
    – Bob Baerker
    Jun 20, 2020 at 14:56

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