The Rise of Retail Investors: Impacts on Market Volatility and Trading Patterns

Due to COVID-19 and other factors, the number of retail investors trading in equity markets has become much larger in the past years. The study explores how this increased activity affects the volatility of the market and stock trading in both the United States and India. Examining secondary data and case studies—covering recent events in GameStop/AMC, Zomato/Paytm IPOs and the Adani Group selloff—the study has proved that retail-led speculation increases market turbulence and disrupts its normal balance. Consideration is given to platform games, comments on social media and influences due to herding and the fear of missing out. When transaction levels in retail increase, we see similar behavior patterns in markets that are not related to trends. The study goes on to mention that there should be additional financial literacy and safety measures for trading, along with appropriate regulations. Conclusions underline the way retail movements impact the market and recommend approaches for investigating rules and guidance, sentiment analysis and using AI in retail trading.