Fast and Furious: A High-Frequency Analysis of Robinhood Users' Trading Behavior

TL;DR

This study examines Robinhood users' rapid trading responses to intraday and overnight price changes, revealing a preference for big losers, quick reactions to negative returns, and varied behaviors across sectors and firm sizes.

Contribution

It provides a high-frequency analysis of Robinhood trading behavior, highlighting rapid reactions and sector-specific strategies not previously documented in daily-based studies.

Findings

Robinhood users favor big losers over big gainers.

Users react within an hour to extreme negative returns.

Trading behaviors vary by firm size and industry.

Abstract

We analyze Robinhood (RH) investors' trading reactions to intraday hourly and overnight price changes. Contrasting with recent studies focusing on daily behaviors, we find that RH users strongly favor big losers over big gainers. We also uncover that they react rapidly, typically within an hour, when acquiring stocks that exhibit extreme negative returns. Further analyses suggest greater (lower) attention to overnight (intraday) movements and exacerbated behaviors post-COVID-19 announcement. Moreover, trading attitudes significantly vary across firm size and industry, with a more contrarian strategy towards larger-cap firms and a heightened activity on energy and consumer discretionary stocks.