Retail Investor Behavior: Attention, Gamification, and Platform Trading

Abstract

Retail investor behavior—how individual investors make portfolio decisions, respond to market information, and interact with financial markets—has been a productive research area since Barber and Odean’s (2000, 2001) foundational analyses demonstrated that retail investors systematically underperform due to overconfident excessive trading, the disposition effect (selling winners too early and holding losers too long), and behavioral biases in portfolio construction. The emergence of commission-free mobile trading platforms (Robinhood, launched 2013), the COVID-19 pandemic’s combination of forced savings, time at home, and government transfers, and the January 2021 GameStop short squeeze—in which retail investors coordinating on Reddit’s WallStreetBets forum drove GameStop’s stock from $20 to $483—have transformed the retail investor landscape in ways that demand academic reconsideration of earlier findings. This paper reviews the established behavioral finance evidence on retail investor underperformance, examines the gamification features of new trading platforms and their documented effects on investor behavior, and analyzes the GameStop episode as a case study in social media-coordinated retail trading.