Abstract

http://ssrn.com/abstract=1105470
 
 

References (43)



 
 

Citations (19)



 
 

Footnotes (32)



 


 



Individual Investors and Volatility


Thierry Foucault


HEC Paris - Finance Department

David Alexandre Sraer


Princeton University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

David Thesmar


HEC Paris - Finance Department

June 1, 2009

Journal of Finance, Forthcoming
AFA 2009 San Francisco Meetings Paper

Abstract:     
We show that retail trading activity has a positive effect on the volatility of stock returns. To identify this effect, we use a reform of the French stock market that triggers a drop in retail trading activity by raising the relative cost of speculative trading for retail investors. The daily return volatility of the stocks affected by the reform falls by twenty 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. We argue that these findings are consistent with the view that some retail investors behave as noise traders.

Number of Pages in PDF File: 75

Keywords: Idiosyncratic Volatility, Retail Trading, Noise Trading

JEL Classification: G14, G12, G11

working papers series


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Date posted: March 17, 2008 ; Last revised: March 13, 2013

Suggested Citation

Foucault, Thierry and Sraer , David Alexandre and Thesmar, David, Individual Investors and Volatility (June 1, 2009). Journal of Finance, Forthcoming; AFA 2009 San Francisco Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1105470 or http://dx.doi.org/10.2139/ssrn.1105470

Contact Information

Thierry Foucault (Contact Author)
HEC Paris (Groupe HEC) - Finance Department ( email )
1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
(33)139679569 (Phone)
(33)139677085 (Fax)
HOME PAGE: http://thierryfoucault.com/

David Alexandre Sraer
Princeton University ( email )
22 Chambers Street
Princeton, NJ 08544
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
David Thesmar
HEC Paris (Groupe HEC) - Finance Department ( email )
1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
+33 1 39 67 94 12 (Phone)
HOME PAGE: http://www.hec.fr/hec/eng/professeurs_recherche/p_liste/p_fiche.php?num=135

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References:  43
Citations:  19
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