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  • 2024
  • Working Paper

The Retail Habitat

By: Toomas Laarits and Marco Sammon
  • Format:Print
  • | Language:English
  • | Pages:89
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Abstract

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; Retail Trade; Intangible Capital; Mispricing; Investment; Valuation; Business Earnings

Citation

Laarits, Toomas, and Marco Sammon. "The Retail Habitat." Working Paper, October 2024.
  • SSRN
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About The Author

Marco Sammon

Finance
→More Publications

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More from the Authors
  • Passive Ownership and Price Informativeness By: Marco Sammon
  • Index Rebalancing and Stock Market Composition: Do Indexes Time the Market? By: Marco Sammon and John J. Shim
  • First Citizens' Acquisition of SVB By: Samuel Antill, Marco Sammon and Erik Stafford
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