TY - JOUR
T1 - A (Sub)penny for Your Thoughts
T2 - Tracking Retail Investor Activity in TAQ
AU - Barber, Brad M.
AU - Huang, Xing
AU - Jorion, Philippe
AU - Odean, Terrance
AU - Schwarz, Christopher
N1 - Publisher Copyright:
© 2024 The Authors. The Journal of Finance published by Wiley Periodicals LLC on behalf of American Finance Association.
PY - 2024/8
Y1 - 2024/8
N2 - We placed 85,000 retail trades in six retail brokerage accounts from December 2021 to June 2022 to validate the Boehmer et al. algorithm, which uses subpenny trade prices to identify and sign retail trades. The algorithm identifies 35% of our trades as retail, incorrectly signs 28% of identified trades, and yields uninformative order imbalance measures for 30% of stocks. We modify the algorithm by signing trades using the quoted spread midpoints. The quote midpoint method does not affect identification rates but reduces the signing error rates to 5% and provides informative order imbalance measures for all stocks.
AB - We placed 85,000 retail trades in six retail brokerage accounts from December 2021 to June 2022 to validate the Boehmer et al. algorithm, which uses subpenny trade prices to identify and sign retail trades. The algorithm identifies 35% of our trades as retail, incorrectly signs 28% of identified trades, and yields uninformative order imbalance measures for 30% of stocks. We modify the algorithm by signing trades using the quoted spread midpoints. The quote midpoint method does not affect identification rates but reduces the signing error rates to 5% and provides informative order imbalance measures for all stocks.
UR - http://www.scopus.com/inward/record.url?scp=85191991068&partnerID=8YFLogxK
U2 - 10.1111/jofi.13334
DO - 10.1111/jofi.13334
M3 - Article
AN - SCOPUS:85191991068
SN - 0022-1082
VL - 79
SP - 2403
EP - 2427
JO - The Journal of Finance
JF - The Journal of Finance
IS - 4
ER -