Skip to the content


"Retail Investors and the Cross-Section of Stock Returns"

by Prof. R. David McLean, Georgetown University


Date   13 Nov 2018 (Tue)
Time   11:00am - 12:30pm
Venue   Rm M714, 7/F, Li Ka Shing Tower, PolyU
Abstract   We estimate long-horizon changes in retail investors’ portfolio weights by accumulating trades over periods ranging from 1 month to 3 years, and scaling these amounts by shares outstanding. Using these measures, we report several novel findings. First, retail investors may contribute to anomaly mispricing, as they accumulate shares in stocks that eventually become anomaly-shorts and reduce holdings in stocks that become anomaly-longs. Second, retail investors trade in the wrong direction with respect to anomaly strategies, as they buy stocks that are currently anomaly-shorts, and sell stocks that are currently anomaly-longs. Finally, increases in retail portfolio weights are associated with lower future stocks returns. Taken in their entirety, the results suggest that when evaluated based on accumulative trading metrics, retail investor underperform and create profitable trading opportunities for other investors.

All are welcome!