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GameStop and AMC Stocks Surge on Real News

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Written by Staff
Updated 1/18/2023 2 min read

At writing, GameStop Corp. (NYSE: GME) stock is trading near $240 per share, an increase of more than 500% off of its February lows. And while it’s still one of the most shorted stocks on Wall Street, there is positive news driving the latest moves.

According to Highshortinterest.com, about 41% of the public float is currently sold short — a far cry from the 140% at its peak in January, but still the highest short interest of any listed stock.

Yesterday, the company announced Ryan Cohen will join GameStop to lead its e-commerce team. Cohen founded Chewy.com, which he sold to Petsmart for $3.35 billion. He was named to Fortune magazine’s 40 under 40 list in 2019.

Another WallStreetBets favorite, AMC Entertainment Holdings, Inc. (NYSE: AMC) is up nearly 90% from its February lows. At writing, the stock is trading just under $10 per share.

This stock did receive an analyst upgrade of sorts. Michael Pachter, an analyst from the investment firm Wedbush Securities, doubled his price target from $2.50 to $5, which is still nearly a 50% discount from today’s price.

And despite many restrictions being lifted around the country, Pachter wrote, it’s “tough to get positive here, despite rising industry optimism,” as per TheStreet. 

GME and AMC were among several “meme stocks” that became extremely volatile in January when members of the Reddit group WallStreetBets started buying the stocks aggressively.

The activity caught the eyes of lawmakers in Washington, D.C.

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”