Did stimulus payments spur YOLO investing?
Future. One of the biggest financial trends during the pandemic was the rise in meme stocks — retail traders using investment apps like Robinhood and Public to (usually irrationally) prop up struggling companies. New research shows that stimulus checks may have played a big role in funding these crusades, which may make the government reconsider how it doles out money next time it wants to stimulate the economy… because investment doesn’t equal stimulus.
According to researchers from Harvard and New York University, stimulus checks may have been funneled straight to meme stocks like GameStop and AMC.
- The researchers used a variety of factors (social media posts, financial reporting, etc.) to determine when meme stocks popped.
- Three weeks after the first $1,200 stimulus checks arrived in April 2020, meme-stocks gained 15.5% more investment than non-meme stocks.
- Three weeks after the second round of stimulus checks in December 2020, meme stocks did 18.7% better than non-meme stocks.
- Interestingly, there didn’t seem to be any sizable jump in meme stock investment after the third round of stimulus checks in March 2021.
So, at least circumstantially, stimulus checks (the early ones) did lead to more investment in meme stocks. With the checks representing “free” money, it could have given retail traders a psychological go-ahead to gamble with it.