Can Retail Investors Drive up Stock Prices?

Abstract: This study finds that return on the NYSE largest-cap portfolio significantly increases following the shock to the percentage change in NYSE odd lot purchase volume. Based on the analysis of monthly data from 1970M2 to 2012M12, results reveal a causal linkage between return on the NYSE largest-cap portfolio and the percentage change in NYSE odd lot purchase volume. Findings suggest that purchase trades placed by retail investors, on average, help drive up future prices of large-cap stocks. Keywords: Odd Lot Purchase, Retail Investor, Trading Activity, Stock Market Return JEL Classification Number: G12, G14