Nominal Prices, Retail Investor Participation, and Return Momentum

• 成果类型: Article; Early Access
• 署名作者: Du, Jun; Huang, Dashan; Liu, Yu-Jane; Shi, Yushui; Subrahmanyam, Avanidhar; Zhang, Huacheng
• 署名单位: Renmin University of China; Singapore Management University; Peking University; Monash University; University of California System; University of California Los Angeles; University of Edinburgh
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.01423
• 发表日期: 2025
• 关键词: momentum; RETAIL INVESTORS; nominal stock prices

摘要

We employ an identification strategy for retail participation to explore the link between return momentum and investing clientele. This scheme relies on strictly enforced round-lot rules in China, which financially constrain retail investors from participating in stocks with high nominal prices. We find that there is strong momentum in high-priced stocks but no momentum on aggregate. This result supports the idea that noise trades of retail investors mask momentum, whereas other more sophisticated investors contribute to momentum. We validate this notion by showing that retail investors with small (large) portfolios are less (more) prone to participating in stocks with high nominal prices. Further, small investor participation increases and momentum weakens following splits in highpriced stocks. Finally, we find that the positive relation between nominal prices and momentum extends to a considerable majority of international markets with round-lot rules.