The Equity Market Implications of the Retail Investment Boom

[Spekulatius]

I found this fascinating paper in a Reddit link:

https://poseidon01.ssrn.com/delivery.php?ID=484029088111001006073096089006124072016089038039060053007117008027101109086070094109010114056102019017037122126017076092001119048032033082076106112103120089107007108007092010066127087083116113078084112013080121119068105018026076012080024093073071113085&EXT=pdf&INDEX=TRUE

 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3776421

 

Third, we assess the return implications of the surge in retail trading activity for individual stocks within the S&P500. For these stocks, Robinhood traders hold a relatively small fraction of the total shares outstanding. We show that they nevertheless provided considerable liquidity for some large individual stocks in Q1 and strongly amplified their subsequent recovery in Q2. The strong price impact is driven by the fact, that these stocks are primarily held by large, passive investors with strongly inelastic demand curves. These findings shed light on the recent events in January 2021. While GameStop was subject to substantial short interest by hedge funds, the majority of its long investor base was primarily inelastic. We find that, as of July 2020, buying 10% of GameStop’s shares

outstanding would translate into a 57% return.

 

 

[ValueArb]

So the report is saying that Burry and the other longs had diamond hands that they were able to dump on to Redditors at insane prices?

 

Frankly I'm amazing that Senvest and Burry were able to hold out until the multiple hundreds. I probably would have sold at $20, but I guess thats what makes Michael Burry a G.O.A.T. and me, me.

[Ice77]

No, Burry didn't ride the GME squeeze. He sold out of his GME stock position well before the squeeze. He may still have had call options but he definitely didn't ride the stock in size beyond the $20 handle (which is still a very good outcome).

 

https://www.sec.gov/Archives/edgar/data/1649339/000156761921003819/xslForm13F_X01/form13fInfoTable.xml (13F as of Dec 31,2020)

https://www.sec.gov/Archives/edgar/data/1649339/000156761920019679/xslForm13F_X01/form13fInfoTable.xml (13F as of Sep 30,2020)

[bizaro86]

No, Burry didn't ride the GME squeeze. He sold out of his GME stock position well before the squeeze. He may still have had call options but he definitely didn't ride the stock in size beyond the $20 handle (which is still a very good outcome).

 

https://www.sec.gov/Archives/edgar/data/1649339/000156761921003819/xslForm13F_X01/form13fInfoTable.xml (13F as of Dec 31,2020)

https://www.sec.gov/Archives/edgar/data/1649339/000156761920019679/xslForm13F_X01/form13fInfoTable.xml (13F as of Sep 30,2020)

 

Yeah, Burry sold out during Q4, which isn't really a surprise, imo. Some discussion here:

 

https://seekingalpha.com/article/4406847-assessing-michael-burrys-portfolio-changes-after-profitable-gamestop-trade