TY - JOUR
T1 - The impact of Robinhood traders on the volatility of cross-listed securities
AU - Aharon, David Y.
AU - Baig, Ahmed S.
AU - Delisle, R. Jared
N1 - Publisher Copyright:
© 2022 Elsevier B.V.
PY - 2022/4
Y1 - 2022/4
N2 - This study investigates the impact of Robinhood investors' participation on the volatility of American depository receipts (ADRs). Using data on Robinhood account holdings in 382 ADRs from 33 countries around the globe, we show that their activity amplifies the cross-listed securities volatility. While Robinhood investors' involvement has soared in recent years, seemingly supplying additional trading liquidity, this provision appears to be associated with a deterioration of ADR stability. The detrimental effect holds across the COVID-19 period and is not subsumed by home-country pandemic intensity measures. Since the law of one price suggests that increased ADR volatility will negatively impact the underlying stocks in their home markets, our results have important implications for various government and market policy makers as well as for home-country firms considering cross-listing their stocks.
AB - This study investigates the impact of Robinhood investors' participation on the volatility of American depository receipts (ADRs). Using data on Robinhood account holdings in 382 ADRs from 33 countries around the globe, we show that their activity amplifies the cross-listed securities volatility. While Robinhood investors' involvement has soared in recent years, seemingly supplying additional trading liquidity, this provision appears to be associated with a deterioration of ADR stability. The detrimental effect holds across the COVID-19 period and is not subsumed by home-country pandemic intensity measures. Since the law of one price suggests that increased ADR volatility will negatively impact the underlying stocks in their home markets, our results have important implications for various government and market policy makers as well as for home-country firms considering cross-listing their stocks.
KW - ADR
KW - American depository receipts
KW - Commission free trading
KW - Retail Investors
KW - Robinhood
KW - Volatility
UR - http://www.scopus.com/inward/record.url?scp=85124414137&partnerID=8YFLogxK
U2 - 10.1016/j.ribaf.2022.101619
DO - 10.1016/j.ribaf.2022.101619
M3 - Article
AN - SCOPUS:85124414137
SN - 0275-5319
VL - 60
JO - Research in International Business and Finance
JF - Research in International Business and Finance
M1 - 101619
ER -