By Yu Tao, Research Institute of Finance, DRC & Zhang Xueyong, School of Finance at Central University of Finance and Economics

Research Report, No.354, 2021 (Total 6419) 2021-11-25

Abstract: The Internet has changed the ways of connection and exchanges between individual investors, amplified the herd and bandwagon effect, and increased volatility of the capital market. With the proliferation of investment information on the Internet and rapid development of social platforms, it is possible for individual investors to affect each other and gather for transactions, which have enhanced their joint action. Incidents such as the sharp rise of the stock price of U.S.-based GameStop Corporation and forced selling of silver are typical cases of malicious joint action of individual investors in the era of Internet, showing that the complicated social network based on the Internet can tangibly affect individual investors’ expectations and investment decisions. China has also seen prevalent joint action of individual investors. However, international supervision on joint action of individual investors is still in its infancy. To fend off the risks induced by malicious joint action of individual investors in the era of Internet, measures are needed to strengthen online information disclosure, improve regulation on online media outlets and microbloggers with wide influence and enhance education on investors.

Keywords: individual investors, malicious joint action, manipulation, information disclosure