Journal of Financial and Quantitative Analysis Vol. 56 No. 7 2021
Flattening the Illiquidity Curve: Retail Trading During the COVID-19 Lockdown
Abstract
This article studies the impact of retail investors on stock liquidity during the COVID-19 pandemic lockdown in spring 2020. Retail trading exhibits a sharp increase, especially among stocks with high COVID-19–related media coverage. Retail trading attenuated the rise in illiquidity by roughly 40% but less so for high-media-attention stocks. Causality is addressed using the staggered implementation of the stay-at-home advisory across U.S. states. The results highlight that ample free time and access to financial markets facilitated by fintech innovations to trading platforms are significant determinants of retail-investor stock market participation.
- DOI
- 10.1017/s0022109021000387
- Volume
- 56
- Issue
- 7
- Pages
- 2356-2388
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex