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Do Retail Trades Move Markets? (2007)
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BibTeX
@MISC{Barber07doretail,
author = {Brad M. Barber and Terrance Odean and Ning Zhu},
title = {Do Retail Trades Move Markets?},
year = {2007}
}
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Abstract
We study the trading of individual investors using transaction data and identifying buyeror seller-initiated trades. We document four results: (1) Small trade order imbalance correlates well with order imbalance based on trades from retail brokers. (2) Individual investors herd. (3) When measured annually, small trade order imbalance forecasts future returns; stocks heavily bought underperform stocks heavily sold by 4.4 percentage points the following year. (4) Over a weekly horizon small trade order imbalance reliably predicts returns, but in the opposite direction; stocks heavily bought one week earn strong returns the subsequent week, while stocks heavily sold earn poor returns.
