New paper out on efficient markets - article_whoisontheotherside.pdf. Some i found interesting. Also covers bubbles etc.
Rise of quantitative strategies - quantitative funds increased their share of trading from 7.5 to 15.7 percent of the total. Within quantitative funds (not shown), lower-frequency funds went from 6.0 to 4.1 percent of the volume while higher-frequency funds soared from 1.5 to 11.6 percent.
Rise of multi strat hedge funds - These funds, colloquially called “pod shops,” allocate capital across numerous portfolio managers and proactively manage risk across the platform. Many also have “center books” that aggregate positions and manage overall firm-level risk. These funds commonly have total market exposures that are four to five times their invested capital. In recent years, multi-manager funds have delivered strong returns for fundholders when evaluated using volatility to adjust for risk. They have thrived as a result. One estimate suggests that the total number of employees at these funds has jumped from 5,100 in 2017 to 24,000 in 2025. A high percentage of investor flows into hedge funds have gone into these strategies, and their collective growth in assets under management, now about $425 billion, has substantially exceeded that of the rest of the industry. And because these funds use substantial leverage, they are 37 percent of hedge fund trading volume while only about 10 percent of the industry’s assets under management.
The Rise of Retail - retail investors have doubled their market share of equity trading from 2010 to 2025, going from about 10 to 20 percentage points. Nearly one-half of that share increase occurred from 2019 to 2020 alone. An article in the business press suggested that individual investors went from “fringe players” to a “dominant market force.”
There are three main causes of the recent rise in retail activity. The first is the introduction of free trading... Retail trading took off during COVID for various reasons: trading was free, many individuals received stimulus checks, the curtailment of professional sports meant no sports betting, and markets were volatile. Three rounds of stimulus checks, issued in the U.S. from April 2020 to March 2021, correlated with growth in retail trading accounts and activity in stocks that retail investors have favored. Some estimates suggest individuals invested 10-15 percent of their stimulus payments in the stock market.
Matt Levine, a columnist at Bloomberg, came up with the “boredom market hypothesis,” the “basic theory is that ordinary people will do more trading (1) if trading is entertaining and (2) if other things are less entertaining: The more bored they are, the more they will trade stocks.”55 In other words, the stock market was “a casino that happens to still be open.”56 The last cause is the gamification of investing, which should be understood as the gamification of speculating. Gamification encourages activity by using concepts from playing games, including scoring, instant feedback, and rewards. Experiments show that gamification increases risk-taking, especially among those with lower financial literacy.57 A great deal of retail activity today, especially in the equity options market, is veiled gambling. For example, academic research suggests that retail investors do not understand completely the risks they are taking in their options trading strategies, and that their average percentage losses over three days are in the mid-teens.58 Further, retail investors are the most likely to be victimized by “pump and dump” schemes, where swindlers artificially pump up the price of a stock through false or misleading statements, quickly dump their shares at the elevated price, and leave credulous investors with large losses.59 We will again discuss retail investors in the context of analytical skill. But first is the surprising point that individual investors, by one measure, have outperformed mutual funds from 2014 to mid-year 2025.