A new look on the probability of retail investor margin use and margin call

William R. Pratt, Syed Kamal and Aixin Ma

Finance Research Letters, 2023, vol. 54, issue C

Abstract: We revisit a recent article, Kim et al. (2022) Finance Research Letters, vol.45,102146, exploring factors influencing the likelihood of margin trading and margin call for retail investors. We demonstrate that use of a more representative sample and consideration of factors, such as allowing brokers to trade for clients and fee structures, produce estimates different from Kim et al. We find that investors that pay a fee for investment advice are more likely to employ margin and experience a margin call. Whereas investors who grant trading authority to a professional are less likely to use margin and experience a margin call. FINRA National Financial Capability Study (NFCS)

Keywords: Margin call; Margin use; Investment literacy; National financial capability study (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001733

DOI: 10.1016/j.frl.2023.103800

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