Fractional Trading

Fractional trading (FT)—the ability to trade less than a full share—allows low-budget retail investors to trade high-priced stocks. This paper quantifies FT's impact on retail ownership and trading of high-priced stocks by exploiting its sequential introduction at four brokerage firms since November 2019. While small individually, fractional trades can work collectively to generate price pressures and reversals among high-priced stocks if coordinated during attention-grabbing events (such as being featured in Robinhood's Top Mover list or stock split announcements). Post-FT, stock splits depend less on nominal share prices but generate more transitory, positive price pressures that facilitate insider selling