This paper examines the characteristics and pricing of stocks that are actively traded by speculative retail investors. We find that stocks with high retail trading proportion (RTP) have strong lottery features and they attract retail investors with strong gambling propensity. Furthermore, these...

Using a demographics-based proxy for smartness, we show that the portfolio distortions of “smart” investors reflect an informational advantage, while the distortions of “dumb” investors reflect psychological biases. Specifically, smart investors outperform dumb investors by about 3%...

This study shows that individual investors systematically shift their preferences across extreme style portfolios (small vs. large, value vs. growth). These preference shifts are influenced by past style returns and earnings differentials, and advice from investment newsletters, but are...