k_babysit4exit

[[irrational exuberance]] described PIS [Pricep-insensitive selling] in the context of bad news feedback loop. It means selling-at-any-price causing price to keep spiraling down, without regard to the fundamental value of the business.

This happens all the time with retail investors. If 10,000 retail investos hear the same bad news about a stock, half of them would sell all at any price, in order to get rid of a (perceived) toxic asset. These investors don’t like buy-n-hold. They don’t see long-term trend, which is evident in the SP500 index.

The new “equilibrium” price is probably not a consensus of future company earnings, but determined by the number of (shares held by ) panicking investors. It’s actually supply-n-demand.

So when would the decline reach over-sold condition? I don’t know any reliable or universal criteria for “over-sold”, but it doesn’t matter. The bottom could be reached on the same day, or a few days after the bad news. I don’t bother predicting the bottom. I don’t mind selling too low too late, or buying too early

— rise of retail investors in U.S. market

https://www.bis.org/publ/qtrpdf/r_qt2103v.htm
https://www.bnymellonwealth.com/articles/strategy/the-rise-of-retail-traders.jsp

zero-commission brokers brought in millions of retail investors including me.