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Lockdown and retail trading in the equity market

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  • Chiah, Mardy
  • Tian, Xiao
  • Zhong, Angel

Abstract

This paper examines the trading patterns of Australian retail investors during the COVID-19 pandemic in 2020. It addresses the possibility that the Australian stock market may be used as a substitute for gambling due to prolonged lockdowns during the COVID-19 pandemic. Using transaction-level data, we document that retail trading volume increases substantially during 2020, overtaking institutional trading. This trading behavior is consistent with the conjecture that the stock market offers an easily accessible platform as a gambling substitute. We further explore two additional motivations for gambling in the stock market. We find that investors treat stock trading as a fun and exciting activity especially during the second phase of lockdown from July to October 2020. Examining the profitability of retail trading, we show that stocks heavily bought by retail investors consistently generate negative returns. This result resembles the negative expected outcome of gambling loss and demonstrates the danger of trading in a volatile market environment.

Suggested Citation

  • Chiah, Mardy & Tian, Xiao & Zhong, Angel, 2022. "Lockdown and retail trading in the equity market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    • Handle: RePEc:eee:beexfi:v:33:y:2022:i:c:s2214635021001428
    DOI: 10.1016/j.jbef.2021.100598
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    Cited by:

    1. Sarantis Tsiaplias & Qi Zeng & Guay C. Lim, 2023. "Retail Investor Trading Intentions: New Evidence from Australia," The Economic Record, The Economic Society of Australia, vol. 99(327), pages 512-535, December.
    2. Paola Deriu & Fabrizio Lillo & Piero Mazzarisi & Francesca Medda & Adele Ravagnani & Antonio Russo, 2022. "How Covid mobility restrictions modified the population of investors in Italian stock markets," Papers 2208.00181, arXiv.org.
    3. Bhavya Bhatia, 2023. "Indian Millennials’ Financial Literacy and Its Relationship with Financial Instruments and Fintech," Metamorphosis: A Journal of Management Research, , vol. 22(2), pages 109-120, December.

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    More about this item

    Keywords

    COVID-19; Trading volume; Retail trading; Gambling;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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