The Retail Habitat

47 Pages Posted: 9 Nov 2022

See all articles by Toomas Laarits

Toomas Laarits

New York University (NYU) - Department of Finance

Marco Sammon

Harvard Business School

Date Written: October 31, 2022


Retail investors trade hard-to-value stocks. Controlling for size, 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. As an additional consequence, the well-known earnings announcer risk premium is limited to low retail stocks only. Further, high-retail stocks are more sensitive to retail order flow and are especially expensive to trade around earnings announcements. Overall, the findings document a new dimension of investor heterogeneity and suggest the 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 (October 31, 2022). 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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