The Retail Habitat

69 Pages Posted: 9 Nov 2022 Last revised: 3 Jul 2023

See all articles by Toomas Laarits

Toomas Laarits

New York University (NYU) - Department of Finance

Marco Sammon

Harvard Business School

Date Written: July 1, 2023


Retail investors trade hard-to-value stocks. Stocks with a high share of retail-initiated trades are composed of more intangible capital, have longer duration cash-flows and a higher likelihood of being mispriced. Consistent with retail-heavy stocks being harder to value, we document that such stocks are less sensitive to earnings news, more sensitive to retail order flow and are especially expensive to trade around earnings announcements. Additionally, the well-known earnings announcer risk premium is limited to low retail stocks only. Overall, our findings document a new dimension of investor heterogeneity and suggest a comparative advantage of retail in holding hard-to-value stocks.

Keywords: retail investors, retail heterogeneity, earnings announcer premium

JEL Classification: G11, G14

Suggested Citation

Laarits, Toomas and Sammon, Marco, The Retail Habitat (July 1, 2023). Available at SSRN: or

Toomas Laarits

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
New York, NY 10012
United States


Marco Sammon (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

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