Retail order imbalance positively correlates with returns in the days following trades. However, in aggregate, retail investor trades lose money over these same periods. Why? 1) While order imbalance tests value or equally weight stocks, retail purchases are concentrated in stocks earning large...

In theory, investors who have low security selection ability trade more, use leverage more, and perform worse if they are overconfident. We confirm these predictions empirically by analyzing the overconfidence, trading, and performance of retail investors who use margin. Using survey data, we...