Executing trades in style: retail investors vs. institutions

Manapol Ekkayokkaya, Suppasit Jirajaroenying and Christian Wolff

Asia-Pacific Journal of Accounting & Economics, 2022, vol. 29, issue 2, 344-362

Abstract: Employing an exhaustive sample of trades made by all investors in a fully automated order-driven stock market, we examine trade execution prices between retail and institutional investors. Retail investors execute both purchases and sales systematically at better prices than domestic institutions but receive better prices than foreign institutions only when executing sales. Importantly, we also find some evidence consistent with the hypothesis that retail investors have a comparative advantage in executing trades of small-cap stocks. Based on a population of retail trades, our findings are not consistent with the stereotype arising from earlier studies that retail investors are noise traders.

Date: 2022
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DOI: 10.1080/16081625.2020.1754256

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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