Retail Investors and Turnover Anomaly: Evidence from the Korean Equity Market

Abstract

This study is aimed at finding the role of retail investors in the well-documented turnover anomaly in the Korean equity market. Using the stock-level investor trading data from 2004–2015, I find a robust negative relationship between the turnover and the expected stock returns. This relationship is stronger among stocks with a high retail trading proportion (RTP), indicating that the turnover anomaly could be a mispricing generated by the irrational trading of retail investors. This study has strong implications for anomalies and retail investors’ literature.