Do Small Investors Move The Market?


#1

Hi All,

It’s great to read and learn from many so thanks first for sharing your knowledge and experience.

I was reading this article from back in 2011; do small investors move the market? (https://www.investopedia.com/financial-edge/0611/do-small-investors-move-the-market.aspx).

Lots has changed since 2011 particular now with whatsapp groups, communications in general and now platforms like Freetrade, so the question is for example if 100,000 small investors sold £100 of shares on the same day in one company, would it move the market like institutional investors do?


#2

It depends on a whole range of things like market size, how many buys are happening at the same time, liquidity of the stock etc.

100,00 * 100 is 10 million so if you did it for Amazon it wouldn’t move the needle.

If you did it for a AIM company, the violent swing will more than likely cause the stock to be suspended.

I cannot find any details on what triggers AIM shares to be suspended but RBS shares were suspended when they dropped by more than 8% in 2016, this was caused by Brexit. In this case there was billions of £’s of shares sold to cause this.


(Vladislav Kozub) #3

As @saf outlined, purely depends on the market cap. I doubt that small AIM company will attract 100,000 investors to transact within a day, purely due to low awareness.

Your numbers would represent transactions totalling £10m. Considering the LSE companies’ total market cap is about £4tn and there are 2,600 of them, it is roughly £1.5bn per company.

£10m of intraday transactions would represent mere 0.67% of the total value, hence will essentially make no effect considering that 1% - 5% daily swings are a norm.

Therefore, most impact is made by institutions: pension funds, sovereign states’ national savings, other mutual funds and corporations storing their cash in the market. Individuals simply cannot be more impactful.