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Exploring retail investor sophistication: Insights from pseudo T+0 trading activities

Author

Listed:
  • Sun, Xuchu
  • Zhu, Jianchang
  • Chen, Fenggong
  • Li, Tangrong

Abstract

This paper investigates retail investor sophistication by focusing on pseudo T + 0 trading, a specific retail trading strategy. Using tick-by-tick transaction data from the Chinese A-share market, we identify pseudo T + 0 trades and construct pseudo T + 0 trading intensity (PTTI) measures. The PTTI measures exhibit significant predictive power for future returns at weekly and monthly horizons, indicating that pseudo T + 0 trading goes beyond merely exploiting intraday price differentials. PTTI also intensifies under high information uncertainty, suggesting that retail investors use such trades as a precautionary strategy to build a profit cushion against potential losses. Furthermore, PTTI enhances the predictive power of traditional retail order imbalance (ROIB) measures adjusted to exclude pseudo T + 0 trades. Overall, our findings provide novel evidence that pseudo T + 0 trading by retail investors embeds forward-looking information and reflects retail investor sophistication.

Suggested Citation

  • Sun, Xuchu & Zhu, Jianchang & Chen, Fenggong & Li, Tangrong, 2026. "Exploring retail investor sophistication: Insights from pseudo T+0 trading activities," Journal of Behavioral and Experimental Finance, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:beexfi:v:50:y:2026:i:c:s2214635026000444
    DOI: 10.1016/j.jbef.2026.101182
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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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