Abstract
We study the intraday relationship between media sentiment and speculative retail investor trading in leverage products. We find that retail investors enter positions to speculate on the outcome of news and also engage in feedback trading after news releases. Trading intensity increases significantly around positive and neutral news. No such effect is found for negative news, which implies that retail investors are intimidated by negative news and refrain from trading more actively around them. Further, the evidence implies that retail investors are news-momentum traders after positive news and news-contrarian after negative news. The analysis of order submission strategies implies that retail investors trade most aggressively on news articles with a negative tonality. Further, ahead of mandatory news, they have an increased desire to take safety precautions. Generally, leveraged retail investor trading is strongly affected by news. The specific impact differs by both tone and type.
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