Retail trader sophistication and stock market quality: Evidence from brokerage outages

• 成果类型: Article
• 署名作者: Eaton, Gregory W.; Green, T. Clifton; Roseman, Brian S.; Wu, Yanbin
• 署名单位: Oklahoma State University System; Oklahoma State University - Stillwater; Emory University; State University System of Florida; University of Florida
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2022.08.002
• 发表日期: 2022
• 页码: 502-528
• 关键词: Retail investors; High frequency trading; market quality; WallStreetBets

摘要

We study brokerage platform outages to examine the impact of retail investors on financial markets. We contrast outages at Robinhood, which caters to inexperienced investors, with outages at traditional retail brokers. For stocks with high retail interest, we find that neg-ative shocks to Robinhood investor participation are associated with reduced market order imbalances, increased market liquidity, and lower return volatility, whereas the opposite relations hold following outages at traditional retail brokerages. The findings suggest that herding by inexperienced investors can create inventory risks that harm liquidity in stocks with high retail interest, while other retail trading improves market quality.(c) 2022 Elsevier B.V. All rights reserved.