Odd-Lot Trading Activity and Nominal Stock Price

Abstract

We examine the rising of odd-lot trading activity and nominal stock prices in recent years. We find that odd-lot trading activity is positively associated with nominal stock price, on both cross-sectional and time-series basis. After a stock split (reverse split), the odd-lot trading activity decreases (increases) significantly. The positive relationship between odd-lot trading activity and nominal stock price holds for both common stocks and ETFs, and for retail investor trades. For higher priced stocks, there is a higher percentage of odd-lot trades with transaction price occurring within NBBOs.

Keywords: Odd-lot trade, nominal stock price, stock splits, NBBO

JEL Classification: G12, G14