Fractional Trading

63 Pages Posted: 10 Nov 2021 Last revised: 6 May 2022

See all articles by Zhi Da

Zhi Da

University of Notre Dame - Mendoza College of Business

Vivian W. Fang

University of Minnesota - Twin Cities - Carlson School of Management; European Corporate Governance Institute (ECGI)

Wenwei Lin

University of Minnesota, Carlson School of Management

Date Written: November 18, 2021

Abstract

Fractional trading (FT)—the ability to trade less than a full share—allows low-budget retail investors to trade high-priced stocks. This paper quantifies FT's impact on retail ownership and trading of high-priced stocks by exploiting its sequential introduction at four brokerage firms since November 2019. While small individually, fractional trades can work collectively to generate price pressures and reversals among high-priced stocks if coordinated during attention-grabbing events (such as being featured in Robinhood's Top Mover list or stock split announcements). Post-FT, stock splits depend less on nominal share prices but generate more transitory, positive price pressures that facilitate insider selling.

Keywords: Fractional Trading, Retail Investors, Fintech, Market Efficiency, Social Media, Stock Split, Coordination, COVID-19

JEL Classification: G10, G12, G14, G18, G32, G41

Suggested Citation

Da, Zhi and Fang, Vivian W. and Lin, Wenwei, Fractional Trading (November 18, 2021). Available at SSRN: https://ssrn.com/abstract=3949697 or http://dx.doi.org/10.2139/ssrn.3949697

Zhi Da (Contact Author)

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

Vivian W. Fang

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Wenwei Lin

University of Minnesota, Carlson School of Management ( email )

321 19th Avenue South
Minneapolis, MN 55455
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
589
Abstract Views
2,315
rank
68,492
PlumX Metrics