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Flattening the Illiquidity Curve: Retail Trading During the COVID-19 Lockdown

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  • Ozik, Gideon
  • Sadka, Ronnie
  • Shen, Siyi

Abstract

This article studies the impact of retail investors on stock liquidity during the COVID-19 pandemic lockdown in spring 2020. Retail trading exhibits a sharp increase, especially among stocks with high COVID-19–related media coverage. Retail trading attenuated the rise in illiquidity by roughly 40% but less so for high-media-attention stocks. Causality is addressed using the staggered implementation of the stay-at-home advisory across U.S. states. The results highlight that ample free time and access to financial markets facilitated by fintech innovations to trading platforms are significant determinants of retail-investor stock market participation.

Suggested Citation

  • Ozik, Gideon & Sadka, Ronnie & Shen, Siyi, 2021. "Flattening the Illiquidity Curve: Retail Trading During the COVID-19 Lockdown," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 56(7), pages 2356-2388, November.
    • Handle: RePEc:cup:jfinqa:v:56:y:2021:i:7:p:2356-2388_3
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