Lockdown and retail trading in the equity market

Mardy Chiah, Xiao Tian and Angel Zhong

Journal of Behavioral and Experimental Finance, 2022, vol. 33, issue C

Abstract: This paper examines the trading patterns of Australian retail investors during the COVID-19 pandemic in 2020. It addresses the possibility that the Australian stock market may be used as a substitute for gambling due to prolonged lockdowns during the COVID-19 pandemic. Using transaction-level data, we document that retail trading volume increases substantially during 2020, overtaking institutional trading. This trading behavior is consistent with the conjecture that the stock market offers an easily accessible platform as a gambling substitute. We further explore two additional motivations for gambling in the stock market. We find that investors treat stock trading as a fun and exciting activity especially during the second phase of lockdown from July to October 2020. Examining the profitability of retail trading, we show that stocks heavily bought by retail investors consistently generate negative returns. This result resembles the negative expected outcome of gambling loss and demonstrates the danger of trading in a volatile market environment.

Keywords: COVID-19; Trading volume; Retail trading; Gambling (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:33:y:2022:i:c:s2214635021001428

DOI: 10.1016/j.jbef.2021.100598

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