What If Robinhood Traders Are Not Risk Averse?
Robinhood traders are widely characterized as the ultimate investing cowboys. These are traders who do not fear risk, but seek it out. They trade options in stocks like GameStop and Tesla because there is insufficient action in the stock itself. Rarely, however, are the valuation implications of the rise such investors spelled out explicitly. To take that step, I make the conservative assumption that Robinhood investors are risk neutral – this means attempt to maximize their profits without regard to risk. They will take any investment on which they expect to make money, even if it means beari...