Heterogeneity in Retail Investors: Evidence from Comprehensive Account-Level Trading and Holdings Data

87 Pages Posted: 28 Jan 2021

See all articles by Charles M. Jones

Charles M. Jones

Columbia Business School

Donghui Shi

Shanghai Stock Exchange

Xiaoyan Zhang

Tsinghua University - PBC School of Finance

Xinran Zhang

Tsinghua University, PBC School of Finance, Students

Date Written: December 8, 2020

Abstract

Retail investors are heterogeneous, with vast differences in wealth, skills and demographics. Using comprehensive proprietary account-level data on trading and holdings from the Shanghai Stock Exchange from 2016 to 2019, we separate tens of millions of retail investors into five groups by their account sizes as well as other demographic variables, and we examine their trading behavior and return performance in Chinese equities. Retail investors with account sizes less than three million CNY follow momentum trading strategies, and the prices of stocks they buy experience negative returns next day, while the ones they sell experience positive returns. In contrast, retail investors with larger account balances follow contrarian strategies, and they buy and sell stocks in directions consistent with future price movements. In addition, retail investors with smaller account sizes fail to process public news and they incur losses from trading, while retail investors with larger account sizes incorporate public news in their trading and experience trading gains. These patterns are stronger for young male retail investors.

Keywords: Retail investors, Chinese stock market, Return predictability, Gain and loss

JEL Classification: G12, G14, G15

Suggested Citation

Jones, Charles M. and Shi, Donghui and Zhang, Xiaoyan and Zhang, Xinran, Heterogeneity in Retail Investors: Evidence from Comprehensive Account-Level Trading and Holdings Data (December 8, 2020). Available at SSRN: https://ssrn.com/abstract=3744772 or http://dx.doi.org/10.2139/ssrn.3744772

Charles M. Jones

Columbia Business School ( email )

3022 Broadway
Uris Hall Rm 101
New York, NY 10027
United States
(212) 854-4109 (Phone)

HOME PAGE: http://https://www8.gsb.columbia.edu/cbs-directory/detail/cj88

Donghui Shi

Shanghai Stock Exchange ( email )

Shanghai 200120
China

Xiaoyan Zhang

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Xinran Zhang (Contact Author)

Tsinghua University, PBC School of Finance, Students ( email )

No. 43, Chengdu Road
Beijing 100083
China

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