Nominal Price (Dis)illusion: Fractional Shares on Neobroker Trading Platforms

46 Pages Posted: 18 Dec 2023 Last revised: 6 Feb 2024

Date Written: December 4, 2023


We investigate neobrokerage traders' preferences for low nominal prices. We hypothesize that innovations such as zero-cost commission and corporate news alerts amplify nominal price illusion biases. We find supportive evidence for a more powerful response than documented in the literature for regular exchanges, using exogenous interventions of stock splits on Robinhood. Surprisingly, one innovation changes everything: the introduction of fractional shares. It eliminates previously amplified effects, while short-term herding behavior based on company news and momentum remains. Our findings primarily support the trading constraints hypothesis over the cognitive bias hypothesis to explain the nominal price illusion.

Keywords: Nominal Price Illusion, Fractional Shares, Stock Splits, Robinhood

JEL Classification: G02,G11,G14,G21,G23

Suggested Citation

Mattusch, Matthias, Nominal Price (Dis)illusion: Fractional Shares on Neobroker Trading Platforms (December 4, 2023). Available at SSRN: or

Matthias Mattusch (Contact Author)

Dresden University of Technology ( email )

Einsteinstrasse 3
Dresden, 01062

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