In our last post, we made the point that small investors are having a smaller impact on the stock market.
So what does it all mean?
For one thing, it signals a significant change in the role of the small investor. In the 1990s, as small investors jumped into the market in force, they increased demand and pushed stock prices up. Now, as investors flee the market, their exit is becoming self-fulfilling to some degree, as the exit by a large number of investors has held down stock prices.
The market void is being filled to some degree by high-frequency trading (HFT), in which computer-driven trading by large firms attempts to take advantage of momentary pricing inefficiencies. With HFT, highly leveraged trades take place in nanoseconds.