Speculative Retail Trading and Asset Prices

By Bing Han, Alok Kumar. Journal of Financial and Quantitative Analysis, 2013

346 citations recorded by the source corpus.

Abstract This paper examines the characteristics and pricing of stocks that are actively traded by speculative retail investors. We find that stocks with high retail trading proportion (RTP) have strong lottery features and they attract retail investors with strong gambling propensity. Furthermore, these stocks tend to be overpriced and earn significantly negative alpha. The average monthly return differential between the extreme RTP quintiles is −0.60%. This negative RTP premium is stronger among stocks that have lottery features or arelocated in regions where people exhibit stronger gambling propensity. Collectively, these results indicate that speculative retail trading affects stock prices.

Subfields: Clinical Psychology, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/5b054732f7e83f93da01a2e59ee84f51df840c9b

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Clinical Psychology

In Economics and Econometrics

In Finance

Citations in the corpus

Political contributions and analyst behavior (2015, positive): “Motivated by Brandt et al. (2010) and Han and Kumar (2013), we define RTP as the ratio of monthly dollar volume of retail trades and the total trading volume for a stock in a given month.”
Roughing up Beta: Continuous vs. Discontinuous Betas, and the Cross-Section of Expected Stock Returns (2014, neutral): “However, as previously showed in the literature, the idiosyncratic volatility puzzle is primarily driven by small firms (Fu, 2009), firms that are dominated by retail investors (Han and Kumar, 2013), and lottery-like firms (Bali, Cakici, and Whitelaw, 2011).”