Frustrated gamblers turn to stocks
Share trading volumes have surged during the pandemic, as people make the most of social distancing and lockdown to try their hand at trading. But the risks facing inexperienced traders can have devastating financial and mental implications.
“Trading volumes peaked at one of the highest levels yet, both internationally and in Australia, during lockdowns imposed in response to Covid-19,” says Angel Zhong, a senior finance lecturer at RMIT University.
“During the lockdown imposed by many countries, people working from home, and particularly those in the younger age group with some savings, had ample time to participate in the stockmarket.”
From January 23 to May 15, 2020 home trading volumes spiked 50% globally, while Australia saw a jump of 66%.
“It’s likely that investors resorted to the sharemarket for a range of reasons, including to secure a bargain, from a fear of missing out and to participate in get-rich-quick schemes,” says Zhong.
Inexperienced trading can have tragic consequences, however.
Alexander Kearns, a University of Nebraska student, committed suicide in June after believing he had lost more than $US730,000 (about $1 million) on the trading app Robinhood. (In fact, an app glitch incorrectly showed the loss.)
“How was a 20-year-old with no income able to get assigned almost a million dollars’ worth of leverage?” he wrote in a note found after his June 12 suicide. “I also have no clue what I was doing now in hindsight.”
Zhong says the closure of casinos and other gambling venues due to the pandemic is another factor associated with the increase in volumes, as people trading from home sought a substitute for gambling.
“The surge in trading volume was highest in countries with a greater level of trust in the society, lower avoidance of uncertainty, and in countries with a higher degree of individualism or overconfidence,” she says.