Individual Investors and Volatility

Abstract : We show that retail trading activity has a positive effect on the volatility of stock returns, which suggests that retail investors behave as noise traders. To identify this effect, we use a reform of the French stock market that raises the relative cost of speculative trading for retail investors. The daily return volatility of the stocks affected by the reform falls by 20 basis points (a quarter of the sample standard deviation of the return volatility) relative to other stocks. For affected stocks, we also find a significant decrease in the magnitude of return reversals and the price impact of trades.
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Journal of Finance, Wiley, 2011, 66 (4), pp.1369-1406. 〈10.1111/j.1540-6261.2011.01668.x〉
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Soumis le : samedi 8 octobre 2011 - 15:48:58
Dernière modification le : jeudi 11 janvier 2018 - 06:19:31

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Thierry Foucault, David Sraer, David Thesmar. Individual Investors and Volatility. Journal of Finance, Wiley, 2011, 66 (4), pp.1369-1406. 〈10.1111/j.1540-6261.2011.01668.x〉. 〈hal-00630297〉

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