Otherwise, a hedge fund could make huge profits by just doing the opposite.
Do we know that this isn’t currently happening, i.e. that observing what retail investors buy and betting against them isn’t a major profit stream for hedge funds?
Sure, it’s part of how they earn money, but competition between them limits what’s left, since they’re bidding against each other to take the other side from the retail investor, who buys from or sells to the hedge fund offering the best deal at the time (made somewhat worse by deadweight losses from investing in speed).
Do we know that this isn’t currently happening, i.e. that observing what retail investors buy and betting against them isn’t a major profit stream for hedge funds?
Sure, it’s part of how they earn money, but competition between them limits what’s left, since they’re bidding against each other to take the other side from the retail investor, who buys from or sells to the hedge fund offering the best deal at the time (made somewhat worse by deadweight losses from investing in speed).