by bobby l hickman
DO RETAIL INVESTORS
MOVE MARKETS?
stilt inc. research links ROBINHOOD activity uptick to market rebound
Did an influx of funds from retail investors drive the recent stock market rebound?
W
hile the debate continues over how big a role private investment played in the recovery, San Franciscobased lender Stilt, Inc., has added its own analysis indicating a direct correlation between investments through the Robinhood app and the spring 2020 rebound of the S&P 500. When the stock market bottomed out the week of March 16-22, Stilt research found Robinhood also experienced the largest inflows of retail investments. As the S&P 500 rebounded through mid-May to recover more than half of losses, Robinhood also saw a major influx of retail investments. Research by Bespoke Investment Group focusing on lower-priced shares also concluded Robinhood activity played a significant role in the markets’ recovery. However, not everyone reached the same conclusion. A June study by Barclays PLC analyzing at the entire S&P determined when more Robinhood customers bought a stock, the result was lower returns rather than higher ones. Industry analysts also suggested the May rebound was more driven by such factors as low interest rates, $2 trillion in government stimulus, and Federal Reserve actions to backstop securities and bonds. The Stilt research was based data about its customers’ activities. Stilt primarily targets recent immigrants for its loan products. As a part of the application process, applicants agree to link the Stilt 6 / ADVISORS MAGAZINE
SEPT 2020
platform with their bank accounts. That connection provides Stilt with information at a transaction level to support credit decisions – and with raw data for further analysis. The company’s Robinhood study was based on 5,000 randomly selected applicants who applied for new loans with Stilt during the first five months of 2020. These applicants ranged from 18 years old up to as much as age 80, although the customer base skews more to the younger ages. “We took these applicants and looked at activity in their primary bank account across different brokerages,” co-founder Rohit Mittal said in an interview with Advisors Magazine. “Then we zeroed in on how much money are people investing in Robinhood during 2020 week by week. Because we have detailed transaction-level data, we aggregated it on a weekly basis, and then mapped it to the S&P returns for the first 20 weeks in the year.” The company added in its blog about the study, “With COVID-19 still a significant impediment to stock market health in the U.S., it remains to be seen if retail investment on Robinhood will continue to drive stock market recovery.” Since the study, Mittal added, his firm has seen consistent Robinhood activity by its customers, but no real increase in the amount of money invested. The Robinhood study is one of many that Stilt undertakes using customer data.
Rohit Mittal, Founder of Stilt Inc. Stilt is a mission-driven fintech company focused on providing credit to immigrants and the underserved. We build products to improve financial inclusion and democratize access to the credit.
