 Reprint of: Do retail traders destabilize financial markets? An investigation surrounding the COVID-19 pandemicAhmed S. Baig, Benjamin Blau (), Hassan A. Butt and Awaid Yasin Journal of Banking & Finance, 2023, vol. 147, issue C Abstract: Existing research suggests that retail trading is associated with volatility in financial markets. To extend the literature, we study the dynamic effects of retail trading on volatility during the COVID-19 pandemic. Using marketable retail trades identified from the Boehmer et al. (2021) algorithm and novel empirical methods discussed in Jordá (2005), we document a negative, persistent impact of retail trading on the stability of stock prices that is particularly stronger during the pandemic than during the pre-pandemic period. These results highlight how periods of crises – like the pandemic – affect the destabilizing influence of retail trading. To provide additional evidence, we replicate our empirical exercise during the 2008-09 financial crisis. Consistent with the COVID-19 period, we again find that retail trading leads to more volatility during the financial crisis vis-á-vis the pre-crisis period. These results again support the idea that periods of crises strengthen the link between retail trading and volatility. Keywords: COVID-19 Pandemic; Global financial crisis; Retail trading; Volatility; Local projections (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:147:y:2023:i:c:s0378426622003247 DOI: 10.1016/j.jbankfin.2022.106744 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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