Retail Investors and Momentum

75 Pages Posted: 29 Jul 2022 Last revised: 27 Dec 2022

See all articles by Jun Du

Jun Du

Peking University - Guanghua School of Management

Dashan Huang

Singapore Management University - Lee Kong Chian School of Business

Yu-Jane Liu

Peking University - Guanghua School of Management

Yushui Shi

Monash University - Department of Banking and Finance

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Financial Research Network (FIRN)

Huacheng Zhang

University of Edinburgh Business School

Date Written: July 15, 2022

Abstract

We explore the link between momentum and investing clientele via an identification strategy for retail participation. Specifically, due to a strictly-implemented roundlot restriction, small retail investors are less prone to participating in Chinese stocks with high nominal prices. In turn, there is strong momentum in stocks with high nominal prices, but no momentum on aggregate. Short-term reversals are stronger in low-priced stocks. Institutional holdings enhance momentum in high-priced stocks. Small investor participation increases and momentum weakens following splits in high-priced stocks. The results support the notion that retail trades contribute to short-term reversals, while institutions contribute to momentum.

Keywords: Momentum, Retail investors, Nominal stock prices

JEL Classification: G141, G41

Suggested Citation

Du, Jun and Huang, Dashan and Liu, Yu-Jane and Shi, Yushui and Subrahmanyam, Avanidhar and Zhang, Huacheng, Retail Investors and Momentum (July 15, 2022). Available at SSRN: https://ssrn.com/abstract=4163257 or http://dx.doi.org/10.2139/ssrn.4163257

Jun Du

Peking University - Guanghua School of Management ( email )

Dashan Huang

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore

HOME PAGE: http://dashanhuang.weebly.com/

Yu-Jane Liu

Peking University - Guanghua School of Management ( email )

Beijing
China

Yushui Shi (Contact Author)

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Huacheng Zhang

University of Edinburgh Business School ( email )

EH8 9JS (Fax)

HOME PAGE: http://https://www.business-school.ed.ac.uk/

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