Abstract
Monthly momentum returns increase monotonically across quintile portfolios of stocks sorted by retail trading participation with a top-minus-bottom spread of 1.42% (t-statistics = 3.46). Stocks that are heavily traded by retail investors exhibit lottery-like features such as low prices, high idiosyncratic volatilities/skewness, and high past maximum returns. Using lottery characteristics to proxy for the extent of retail trading, future momentum profits monotonically increase in the cross-sectional lotteryness of stocks over a 77-year back-testing period for which retail trading data is unavailable. Further analysis shows that lottery-like stocks exhibit stronger comovements that amplify momentum profits.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.