Market Accessibility and Investor Behavior: How Trading Hours and Closures Shape Retail Activity and Volatility

The rise of retail investors as a dominant force in global markets has reshaped financial dynamics over the past five years. From 2020 to 2025, retail participation in trading has surged, driven by technological advancements, commission-free platforms, and the democratization of financial information. Today, retail investors account for 20-35% of daily trading volume in major markets like the U.S. and U.K., with even higher engagement in emerging markets such as India and China
according to a decade-in-the-market analysis. This shift has not only altered liquidity patterns but also amplified market volatility, particularly in response to changes in trading hours and market closures.

Extended Trading Hours: A Double-Edged Sword

The push toward 24/7 trading,
sparked by exchanges like the NYSE and Nasdaq, aims to accommodate global investors and align with the 24-hour news cycle. While this expansion promises improved liquidity and price efficiency, it has also introduced new risks. For instance,
pre-market trading activity has surged 15-fold since 2019, with retail investors increasingly trading outside traditional hours to react to macroeconomic news and geopolitical events. This behavior has led to sharp price swings, particularly in speculative sectors like AI and technology, where
thematic buying by retail investors has driven concentrated flows.

However, extended hours trading also raises concerns about market infrastructure. Alternative trading systems (ATS), including dark pools, often lack the transparency and liquidity of traditional exchanges,
leaving retail investors vulnerable to volatility. A 2025 study found that
heightened retail activity on platforms like Reddit and Twitter correlates with increased short-term market volatility, underscoring the destabilizing influence of social media-driven herding behavior.

Market Closures and Behavioral Shifts: The China A-Share Case

Market closures, such as the 2024 National Day holiday in China, offer a stark example of how retail investor behavior can diverge from broader market trends. During the Golden Week closure, Chinese equities experienced a five-month winning streak, yet retail spending grew at only half the pace of previous years,
reflecting persistent consumer caution. Meanwhile,
brokerage firms reported a 3x surge in new account openings and 6x more password reset requests, signaling heightened retail interest despite market volatility.

Post-holiday, the A-share market rebounded on policy-driven stimulus,
with liquidity and turnover spiking across segments like the ChiNext board. This case highlights how retail investors often act independently of macroeconomic fundamentals, prioritizing sentiment and speculation over long-term value.

Volatility and Liquidity in the 2025 Bear Market

The 2025 bear market further illustrates the interplay between retail behavior and market volatility.
A study revealed that investor sentiment exerts a 1.7x stronger emotional impact during bull markets than bear markets, with each standard deviation increase in sentiment driving an average 0.48 percentage point rise in volatility. This asymmetry was evident in early 2025, when
A-shares recorded three consecutive days of losses, with all 31 industries tracking declines.

Retail investors, however, displayed mixed responses. While
some scaled back purchases of individual stocks and ETFs, amid valuation concerns, others doubled down on speculative bets, exacerbating short-term swings. Institutional investors, by contrast,
provided stabilizing effects through mutual fund activity, underscoring the nuanced role of different investor types in market dynamics.

Implications for Market Stability and Future Outlook

The growing influence of retail investors necessitates a reevaluation of market infrastructure and regulatory frameworks. While 24/7 trading and global accessibility have expanded participation, they have also introduced risks of behavioral-driven instability. Policymakers must balance innovation with safeguards, such as enhanced transparency in ATS and investor education initiatives to mitigate herding behavior.

For investors, the key takeaway is the need for disciplined strategies amid heightened volatility. As retail flows continue to shape market sentiment, monitoring thematic trends and liquidity shifts will remain critical for navigating an increasingly fragmented and dynamic landscape.