Review of Financial Studies Vol. 38 No. 3 2025
Fractional Trading
Abstract
Fractional trading (FT)—the ability to trade less than a whole share—removes barriers to high-priced stocks and facilitates entry by capital-constrained retail investors. We observe a surge of tiny trades, measured using off-exchange one-share trades, among high-priced stocks compared to low-priced stocks after FT is introduced to the U.S. equity markets. These tiny trades, when coordinated during attention-grabbing events, are forceful enough to exert large price pressure on high-priced stocks. Further evidence suggests that FT can even fuel meme-stock-like trading frenzies and bubbles in high-priced stocks, for which the feedback effect likely plays a role.
- DOI
- 10.1093/rfs/hhae012
- Volume
- 38
- Issue
- 3
- Pages
- 623-660
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref