Amateur investors lost big during pandemic

New research by LBS academics point to hidden costs of zero-commission trading platforms

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New research by London Business School academics Dr Svetlana Bryzgalova, Professor Anna Pavlova and PhD candidate Taisiya Sikorskaya, and reported by Bloomberg, shows amateur investors lost more than US$1 billion trading options during the pandemic.

The authors identified several factors leading to the losses, including a possible failure by novice investors to fully account for indirect trading costs when trading through zero-commission platforms such as Robinhood.

“The more they trade, the more they lose because of these bid-ask spreads - every time, they have to pay the round-trip trading costs,” Professor Pavlova told Bloomberg.

Read more about the research on Bloomberg.