How Wise Are Crowds? Insights from Retail Orders and Stock Returns

  title={How Wise Are Crowds? Insights from Retail Orders and Stock Returns},
  author={Eric K. Kelley and Paul C. Tetlock},
We analyze the role of retail investors in stock pricing using a database uniquely suited for this purpose. The data allow us to address selection bias concerns and to separately examine aggressive (market) and passive (limit) orders. Both aggressive and passive net buying positively predict firms’ monthly stock returns with no evidence of return reversal. Only aggressive orders correctly predict firm news, including earnings surprises, suggesting they convey novel cash flow information. Only… CONTINUE READING


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