Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 7, 2022 erstellt
Description:
I show that retail investors overweight stocks with low prices in their portfolios. In addition, they are more likely to sell stocks with high prices than to sell stocks with low prices. This finding is distinct from the disposition effect. To establish a causal relation, I use stock splits as exogenous shocks to the nominal share price level. On aggregate, retail investors decrease share holdings before a stock split but increase share holdings thereafter. The finding that retail investors overweight low-priced stocks has important implications for portfolio risk. Accounts that hold large shares of their portfolio in low-priced stocks subsequently realize significantly lower Sharpe ratios. My findings are not explained by households' financial constraints and households' preferences for high-beta or lottery-type stocks