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A (Sub)penny for Your Thoughts: Tracking Retail Investor Activity in TAQ

Author

Listed:
  • BRAD M. BARBER
  • XING HUANG
  • PHILIPPE JORION
  • TERRANCE ODEAN
  • CHRISTOPHER SCHWARZ

Abstract

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.

Suggested Citation

  • Brad M. Barber & Xing Huang & Philippe Jorion & Terrance Odean & Christopher Schwarz, 2024. "A (Sub)penny for Your Thoughts: Tracking Retail Investor Activity in TAQ," Journal of Finance, American Finance Association, vol. 79(4), pages 2403-2427, August.
    • Handle: RePEc:bla:jfinan:v:79:y:2024:i:4:p:2403-2427
    DOI: 10.1111/jofi.13334
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    References listed on IDEAS

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    Cited by:

    1. Cheng, Qiang & Lin, Pengkai & Zhao, Yue, 2025. "Does generative AI facilitate investor Trading? Early evidence from ChatGPT outages," Journal of Accounting and Economics, Elsevier, vol. 80(2).
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    4. Badryah Alhusaini & Kimball L. Chapman & Hal D. White, 2025. "Testing the waters meetings, retail trading, and capital market frictions," Review of Accounting Studies, Springer, vol. 30(2), pages 1175-1221, June.
    5. Hong, Eunpyo & Kottimukkalur, Badrinath & Noh, Joonki, 2026. "Uncertain Text and Price Reactions to Earnings Releases," Journal of Banking & Finance, Elsevier, vol. 182(C).
    6. Laarits, Toomas & Sammon, Marco, 2025. "The retail habitat," Journal of Financial Economics, Elsevier, vol. 172(C).
    7. Sui, Yanjun & Tian, Xiao & Zhong, Angel & Chiah, Mardy, 2025. "Beyond the final whistle: AFL grand final and retail investor trading," Finance Research Letters, Elsevier, vol. 85(PD).
    8. Glaze, Jesse L., 2025. "Classifying the direction of Robinhood’s fractional share trades," Finance Research Letters, Elsevier, vol. 83(C).
    9. Li, Qianqian & Watts, Edward M. & Zhu, Christina, 2024. "Retail investors and ESG news," Journal of Accounting and Economics, Elsevier, vol. 78(2).
    10. McLean, R. David & Pontiff, Jeffrey & Reilly, Christopher, 2025. "Taking sides on return predictability," Journal of Financial Economics, Elsevier, vol. 173(C).
    11. Warkulat, Sonja & Pelster, Matthias, 2024. "Social media attention and retail investor behavior: Evidence from r/wallstreetbets," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    12. Goyal, Amit & Reed, Adam V. & Smajlbegovic, Esad & Soebhag, Amar, 2025. "Stealthy shorts: Informed liquidity supply," Journal of Financial Economics, Elsevier, vol. 172(C).
    13. Charles, Constantin, 2025. "Memory moves markets," LSE Research Online Documents on Economics 125551, London School of Economics and Political Science, LSE Library.
    14. Zhi Da & Jian Hua & Tim Chih-Ching Hung & Lin Peng, 2025. "Market Returns and a Tale of Two Types of Attention," Management Science, INFORMS, vol. 71(12), pages 10505-10537, December.
    15. Hu, Danqi & Jones, Charles M. & Zhang, Xiaoyan & Zhang, Xinran, 2025. "When do short sellers trade? Evidence from intraday data and implications for informed trading models," Journal of Financial Economics, Elsevier, vol. 172(C).

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