Investment behavior of retail investors in response to COVID-19 economic impact payments

This study investigates the impact of Economic Impact Payments (EIPs) on retail stock trading and the stock market using Robinhood data. We find that during the EIP period, there was a surge in retail investors who adopted a contrarian strategy by purchasing stocks that experienced significant declines due to COVID-19. However, these stocks relatively underperformed over the following six months, suggesting potential biases in retail investment decisions. Furthermore, a decrease in market quality was observed in these stocks.