Small Trades and the Cross-Section of Stock Returns
Year: 2008
Type: article
Abstract: This paper uses volume arising from small trades to analyze the relationship between retail investor trading behavior and the cross-section of future stock returns. The central finding is that stocks with intense sell-initiated small-trade volume, measured over the past several months, outperform stocks with intense buy-initiated small-trade volume. This return difference accrues from the first month after the portfolio formation up to two years later. Among small- and medium-sized firms, the return difference continues in the third year. The results suggest that stocks favored by retail investors subsequently experience prolonged underperformance relative to stocks out of favor with retail investors.
Source: Review of Financial Studies
DOI: 10.1093/rfs/hhn049
Author: Soeren Hvidkjaer
Institutions: INSEAD, INSEAD, University of Maryland, College Park
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2041562263