Informed Retail Investors: Evidence from Retail Short Sales

Gamble, Keith Jacks; Xu, Wei

doi:10.2139/ssrn.1919885

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Informed Retail Investors: Evidence from Retail Short Sales

41 Pages Posted: 31 Aug 2011 Last revised: 12 Jul 2016

See all articles by Keith Jacks Gamble

Wei Xu

Peking University - HSBC School of Business

Date Written: June 1, 2016

Abstract

Our study suggests that despite the enforcement of insider trading laws, there are still some investors trading on their private information. Using account-level information, we show that some retail investors seem to be informed about particular stocks. When they sell short these stocks, they earn an alpha of 15%; when they purchase these stocks, they earn an alpha of 27%. Other short sales and purchases by the same investor do not earn significant alpha. These informed trades are rare and further evidence suggest that these informed retail trades are motivated by private information rather than trading skill.

Keywords: short selling, informed trading, retail investors

JEL Classification: G14

Suggested Citation: Suggested Citation

Gamble, Keith Jacks and Xu, Wei, Informed Retail Investors: Evidence from Retail Short Sales (June 1, 2016). Available at SSRN: https://ssrn.com/abstract=1919885 or http://dx.doi.org/10.2139/ssrn.1919885