Publication Type
Journal Article
Version
acceptedVersion
Publication Date
7-2025
Abstract
We employ an identification strategy for retail participation to explore the link between return momentum and investing clientele. This scheme relies on strictly enforced round-lot rules in China, which financially constrain retail investors from participating in stocks with high nominal prices. We find that there is strong momentum in high-priced stocks, but no momentum on aggregate. This result supports the idea that noise trades of retail investors mask momentum, while other, more sophisticated investors contribute to momentum. We validate this notion by showing that retail investors with small (large) portfolios are less (more) prone to participating in stocks with high nominal prices. Further, small investor participation increases and momentum weakens following splits in high-priced stocks. Finally, we find that the positive relation between nominal prices and momentum extends to a considerable majority of international markets with round-lot rules.
Keywords
Momentum, Retail investors, Nominal stock prices
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
Management Science
ISSN
0025-1909
Identifier
10.1287/mnsc.2023.01423
Publisher
Institute for Operations Research and Management Sciences
Citation
DU, Jun; HUANG, Dashan; LIU, Yu-Jane; SHI, Yushui; Avanidhar Subrahmanyam; and ZHANG, Huacheng.
Nominal prices, retail investor participation, and return momentum. (2025). Management Science.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7733
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1287/mnsc.2023.01423