Have asked yourself why Wallstreet Bets popularity and Best years for Citadel overlaps?
Or
Why Citadel’s CEO Keneth C. Griffins thanks WSB for creating the best pipeline they ever had?
Let’s review some data before making any hypothesis..!
Ken Griffin's Citadel raked in $16 billion in 2022, marking the best year for any hedge fund in history. Ken Griffin's Citadel posted a record $16 billion in profits last year, notching the largest gain in history.
Citadel Securities is an American market making firm headquartered in Miami. It is one of the largest market makers in the world, and is active in more than 50 countries. The firm has said it handles about 40% of all US retail trading volume and one in every four US equities trades.
Over 15 million people use Robinhood as their primary trading platform.
Robinhood routes more than half of its customer orders to Citadel, by far its largest market-making partner by volume, Robinhood disclosures show.
Robinhood is WSB's weapon of choice, investors and users who have no clue what they're doing.
Why WSB users call themselves Apes?
The study published in the Proceedings of the National Academy of Sciences in 2010 was conducted by a team of researchers led by Dr. Benjamin Hayden at the University of Rochester. The aim of the study was to investigate how monkeys make decisions when faced with the possibility of a reward and a risk.
In the study, the researchers trained rhesus monkeys to perform a task where they had to choose between two symbols displayed on a computer screen. Each symbol was associated with a different amount of juice reward, but one of the symbols also had a chance of delivering a mild air puff to the face, which the monkeys found unpleasant.
The researchers found that the monkeys were willing to take a higher risk when the potential reward was greater, which is consistent with what is observed in human decision-making. However, they also found that the monkeys continued to choose the risky option even when the potential reward was not worth the risk.
To test whether the monkeys were aware of the risk and potential loss, the researchers introduced a "no-risk" option, where the monkeys could choose a symbol that guaranteed a small but safe reward with no chance of an air puff. Despite being aware of this option, the monkeys continued to choose the risky option and receive the air puff.
This behavior suggests that the monkeys were not making rational decisions based solely on the potential reward, but were influenced by other factors such as the thrill of taking a risk or the fear of missing out on a potential reward.
Overall, the study provides insight into how animals, including humans, make decisions when faced with risk and reward. It suggests that our decision-making is not always driven by rational calculations and that other factors such as emotions and social influence can play a role in our choices.
Herd Mentality
there are some theories and observations related to human behavior in financial markets that suggest that herd behavior and imitation can contribute to market bubbles.
For example, some researchers have noted that investors often follow the behavior of others, rather than making independent decisions based on fundamental analysis or market trends. This can lead to a situation where a large number of investors all buy or sell the same assets, creating a "herd" effect that can drive prices up or down rapidly.
In some cases, this behavior can contribute to the creation of market bubbles, where asset prices become significantly inflated due to speculation and investor enthusiasm. Eventually, however, these bubbles tend to burst, resulting in significant losses for those who were caught up in the frenzy.
I think any rational mind has enough information to conclude the schema we are dealing with in the past 3 years!
I would like to end this article with Edward O Thorp quote:
When I shifted my focus from beating gambling games to analyzing the stock market, I naively thought that I was leaving a world where cheating at cards was then problematic and entering an arena where regulation and the rule of law gave investors a fair playing field. Instead, I learned that bigger stakes attracted bigger thieves.
Best,
Or
Why Citadel’s CEO Keneth C. Griffins thanks WSB for creating the best pipeline they ever had?
Let’s review some data before making any hypothesis..!
Ken Griffin's Citadel raked in $16 billion in 2022, marking the best year for any hedge fund in history. Ken Griffin's Citadel posted a record $16 billion in profits last year, notching the largest gain in history.
Citadel Securities is an American market making firm headquartered in Miami. It is one of the largest market makers in the world, and is active in more than 50 countries. The firm has said it handles about 40% of all US retail trading volume and one in every four US equities trades.
Over 15 million people use Robinhood as their primary trading platform.
Robinhood routes more than half of its customer orders to Citadel, by far its largest market-making partner by volume, Robinhood disclosures show.
Robinhood is WSB's weapon of choice, investors and users who have no clue what they're doing.
Why WSB users call themselves Apes?
The study published in the Proceedings of the National Academy of Sciences in 2010 was conducted by a team of researchers led by Dr. Benjamin Hayden at the University of Rochester. The aim of the study was to investigate how monkeys make decisions when faced with the possibility of a reward and a risk.
In the study, the researchers trained rhesus monkeys to perform a task where they had to choose between two symbols displayed on a computer screen. Each symbol was associated with a different amount of juice reward, but one of the symbols also had a chance of delivering a mild air puff to the face, which the monkeys found unpleasant.
The researchers found that the monkeys were willing to take a higher risk when the potential reward was greater, which is consistent with what is observed in human decision-making. However, they also found that the monkeys continued to choose the risky option even when the potential reward was not worth the risk.
To test whether the monkeys were aware of the risk and potential loss, the researchers introduced a "no-risk" option, where the monkeys could choose a symbol that guaranteed a small but safe reward with no chance of an air puff. Despite being aware of this option, the monkeys continued to choose the risky option and receive the air puff.
This behavior suggests that the monkeys were not making rational decisions based solely on the potential reward, but were influenced by other factors such as the thrill of taking a risk or the fear of missing out on a potential reward.
Overall, the study provides insight into how animals, including humans, make decisions when faced with risk and reward. It suggests that our decision-making is not always driven by rational calculations and that other factors such as emotions and social influence can play a role in our choices.
Herd Mentality
there are some theories and observations related to human behavior in financial markets that suggest that herd behavior and imitation can contribute to market bubbles.
For example, some researchers have noted that investors often follow the behavior of others, rather than making independent decisions based on fundamental analysis or market trends. This can lead to a situation where a large number of investors all buy or sell the same assets, creating a "herd" effect that can drive prices up or down rapidly.
In some cases, this behavior can contribute to the creation of market bubbles, where asset prices become significantly inflated due to speculation and investor enthusiasm. Eventually, however, these bubbles tend to burst, resulting in significant losses for those who were caught up in the frenzy.
I think any rational mind has enough information to conclude the schema we are dealing with in the past 3 years!
I would like to end this article with Edward O Thorp quote:
When I shifted my focus from beating gambling games to analyzing the stock market, I naively thought that I was leaving a world where cheating at cards was then problematic and entering an arena where regulation and the rule of law gave investors a fair playing field. Instead, I learned that bigger stakes attracted bigger thieves.
Best,