By: Ines Ferré·Markets Reporter
If you have been following the stock market in the last year, you have seen some anomalies in the stock market as “meme stocks” have seen massive spikes in stock price. “Meme Stocks” refers to stocks that are not viewed as fundamentally sound stocks that have seen large spikes in price change due to discussion boards such as Reddit. These discussion boards will pick said stock and a wave of people will invest in the stock driving the price up artificially. When retail traders have been asked about this phenomenon they have said that the market favors hedge funds and big investors and this craze levels the playing field. The goal of this craze seems to make the market more transparent. Well-known stocks that have been involved in this craze have been AMC and GME. Despite both stocks falling from their highs, they still remain over 50% higher than they were pre-surge. The discussion board army adds an interesting factor to the stock market because it adds an element where if you are paying attention to the right discussion post you may have the ability to invest in a stock that may surge 80% in one day.
4 comments:
I know that the SEC is supposed to have "circuit breakers" that monitor and check these things and shut the trading of these stocks down as they get crazy. I wonder what took them so long to do this when the GameStop craze occurred?
That GME surge can undoubtedly go down in history. When Robinhood made it unable to trade anymore it seemed to really raise concerns with legal activity. Questions needed to be answered. I'll be curious to see if anyone attempts anything like this again but in a slightly different form.
Personally, I think that this is hilarious. If a system in place or a market where people buy and sell things is ruined or reformatted by people who can easily manipulate it, then maybe it shouldn't exist.
I think this can be tied into what we have discussed regarding perfect markets in class. In a perfect market the price of the stock will reflect what it is worth given every individual is educated and is given proper information regarding that security. The problem with this though is that we don't live in a perfect market, and in fact Is imperfect and these two anomalies display that. If our market was perfect the individuals buying high on these assets would know that the source where they are obtaining their information was not accurate resulting in an inaccurate price.
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