DP12462 Trading in style: Retail investors vs. institutions

Author(s): Christian C Wolff
Publication Date: November 2017
Keyword(s):
JEL(s):
Programme Areas: Financial Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12462

We examine the comparative trading performance of retail investors using an exhaustive sample of trades made by all investors in a stock market. Retail investors trade systematically at better prices than institutions, especially domestic institutions. We also find evidence of retail investors having a comparative advantage when trading stocks in their preferred trading style. These findings are consistent with retail investors rationally utilizing their trading flexibility and information made available to them. Based on a population of retail trades, our findings challenge the stereotype arising from earlier studies that retail investors are noise traders.