It's unlikely that the recent hype in stocks like Gamestop and AMC Entertainment was driven entirely by retail investors, argues Bart Zhou Yueshen, assistant professor of finance at INSEAD.
"Given the volume of trade we saw last week, I find it hard to believe that only these private investors tried to push the pressure," Zhou told CNBC's Street Signs Asia on Monday.
Last week, US market headlines were dominated by impressive rallies in stocks like GameStop, which are up more than 1,500% since the start of the year. Investors piled into stocks, with a large percentage of their stocks selling "short" and causing "short squeezes," or, on the other side of the bet, driving traders to buy more stocks to cover their losses.
Short selling is a strategy in which investors borrow shares of a stock at a certain price in the expectation that the market value will drop below that level when it is time to pay for the borrowed shares.
"It's also very hard to believe that with this short press, the buy side is completely retail driven and no institutes are stepping in," he added go in there. "
Retailers have largely been credited with sparking these rallies, particularly investors in the WallStreetBets community on Reddit. The market upheaval has generally been viewed through a populist perspective, with Wall Street pros pitting against amateur traders equipped with zero commission trading apps like Robinhood.
Challenge for regulators
As individual investors expressed their enthusiasm for GameStop, AMC and other Reddit stocks, questions arose as to whether this trading activity amounted to market manipulation.
Zhou said that while regulators "can definitely try to intervene," it is not clear whether they will find evidence of market manipulation.
"In order to establish manipulation, you would first have to establish some kind of intent," said the professor. "I don't think that's so obvious in this case."
He said the chatter on platforms like Reddit can be characterized by investors simply "giving their opinions" about stocks they want to buy and sell.
"The hedge funds can do the same," Zhou said. "Nothing … in that regard is particularly worrying."
The burden of proof is now on the regulators to produce "hard evidence" of wrongdoing. One task Zhou admitted was "quite difficult to determine."
For its part, the Securities and Exchange Commission said it would review the latest trading volatility and say, "We will protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by federal securities laws."
– With reports from Thomas Franck and Pippa Stevens of CNBC.
Subscribe to CNBC PRO for exclusive insights and analysis as well as live business day programs from around the world.