Organized Retail Investors in the US Financial Market - how GME and AMC influence market efficiency

Mick Wannink

Master's thesis

Abstract:

A potential shift of paradigms is approaching the financial markets with the emergence of organized retail investors that systematically seek to exploit the investment methods of institutions. The so-called meme stocks that refer to stocks that developed extensive hype via social media serve as significant examples as they account for significant losses of short-sellers in 2021. In specific the cases of GameStop and AMC Entertainment. This thesis will analyze the role of the newly formed investors group in the financial market. Given that the meme stocks significantly shook the financial markets, the impacts on the various stakeholders and the market balances must be carefully examined. Therefore, after describing the existing theory, market events and participants' behaviors will be compared to market players' theoretical and historic roles & responsibilities to pinpoint differences. Key differences will then be used to derive implications and outlooks. The case studies of AMC Entertainment and GameStop provide a critical addition to the body of knowledge as the topic is recent and crucial to understanding interrelationships, intentions, and shifting powers in the market. Considering that the group of organized retail investors on social media is only growing, other future events are likely. The analysis is conducted under the overarching concept of market efficiency.

Abstract:

A potential shift of paradigms is approaching the financial markets with the emergence of organized retail investors that systematically seek to exploit the investment methods of institutions. The so-called meme stocks that refer to stocks that developed extensive hype via social media serve as significant examples as they account for significant losses of short-sellers in 2021. In specific the cases of GameStop and AMC Entertainment. This thesis will analyze the role of the newly formed investors group in the financial market. Given that the meme stocks significantly shook the financial markets, the impacts on the various stakeholders and the market balances must be carefully examined. Therefore, after describing the existing theory, market events and participants' behaviors will be compared to market players' theoretical and historic roles & responsibilities to pinpoint differences. Key differences will then be used to derive implications and outlooks. The case studies of AMC Entertainment and GameStop provide a critical addition to the body of knowledge as the topic is recent and crucial to understanding interrelationships, intentions, and shifting powers in the market. Considering that the group of organized retail investors on social media is only growing, other future events are likely. The analysis is conducted under the overarching concept of market efficiency.

Keywords

Financial Market Structure, Meme Stocks, Market Efficiency, Social Media, Retail Investors

Keywords

Financial Market Structure, Retail Investors, Market Efficiency, Meme Stocks, Social Media

Language used: English

Date on which the thesis was submitted / produced: 11. 5. 2022

Thesis defence

• Date of defence: 31. 5. 2022
• Supervisor: Heřman Kopkáně
• Reader: Ladislav Tyll

Vysoká škola ekonomická v Praze

Master programme:
International Management