Do retail traders destabilize financial markets? An investigation surrounding the COVID-19 pandemic.

ABSTRACT: Existing research suggests that retail trading is associated with volatility in financial markets. To extend the literature, we study the dynamic effects of retail trading on volatility during the COVID-19 pandemic. Using marketable retail trades identified from the Boehmer et al. (2021) algorithm and novel empirical methods discussed in Jordá (2005), we document a negative, persistent impact of retail trading on the stability of stock prices that is particularly stronger during the pandemic than during the pre-pandemic period. These results highlight how periods of crises - like the pandemic - affect the destabilizing influence of retail trading. To provide additional evidence, we replicate our empirical exercise during the 2008-09 financial crisis. Consistent with the COVID-19 period, we

SUBMITTER: Baig AS 

PROVIDER: S-EPMC9355410 | biostudies-literature | 2022 Nov

REPOSITORIES: biostudies-literature