During the Paris December Finance Meeting, organized on December 16 by EUROFIDAI (European Financial Data Institute) and ESSEC Business School, two LaRGE members received awards for publications.
Carole Métais (LaRGE, EMSBS) and Tristan Roger (CEREFIGE, University of Lorraine) received the EUROFIDAI BEDOFIH prize for the best article published on high frequency data for their article “Are retail investors less aggressive on small price stocks?” published in the Journal of Financial Markets [CNRS cat. 2, FNEGE cat. 2, HCERES cat. A].
We investigate whether number processing impacts the limit order aggressiveness of retail investors. When posting non-marketable orders, individual investors are less aggressive on small price stocks than on large price stocks. This difference is not explained by differences in liquidity and other usual drivers of order aggressiveness. No such difference exists for limit orders of high-frequency traders. The small price bias is detrimental to retail investors since it increases the costs borne when trading small price stocks.
Maxime Merli (LaRGE, EMSBS), Catherine D'Hondt (Louvain School of Management), and Rudy De Winne (Louvain School of Management) received the EUROFIDAI award for the best paper published on daily data for their paper “Do retail investors bite off more than they can chew? A close look at their return objectives” published in the Journal of Economic Behavior & Organization [CNRS cat. 2, HCERES cat. A].
Using self-reported retail investor information from a risk-return profile survey, we investigate the determinants of individual return objectives as well as the capacity of investors to achieve them. Controlling for a large set of covariates, we provide empirical evidence that return objectives are related to subjective individual characteristics (such as financial literacy and risk tolerance), some sociodemographic variables (age and education), and recent past trading intensity. Retail investors with higher return objectives perform better than their counterparts who want to avoid any risk of capital loss. The capacity to achieve the return objective, however, decreases as the level of the objective increases.
We congratulate them for this noteworthy accomplishment!