Do Retail Trades Move Markets?
Review of Financial Studies
2009
We study the trading of individual investors using transaction data and identifying buyer- or seller-initiated trades. We document four results: (1) Small trade order imbalance correlates well with order imbalance based on trades from retail brokers. (2) Individual investors herd. (3) When measured annually, small trade order imbalance forecasts future returns; stocks heavily bought underperform stocks heavily sold by 4.4 percentage points the following year. (4) Over a weekly horizon, small trade order imbalance reliably predicts returns, but in the opposite direction; stocks heavily bought one week earn strong returns the subsequent week, while stocks heavily sold earn poor returns.
- DOI
- 10.1093/rfs/hhn035
- Volume
- 22 (1)
- Pages
- 151-186
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref