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Don Noh on Do retail investors pause during trading pauses?

Don Noh
September 27, 2022
12:15 pm - 1:15 pm
Student Research Workshop

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Room 101

This paper uses high frequency, investor type-level trade flow data in the Korean stock market to study price dynamics and retail investor behavior around rule-based trading pauses. Because trading pauses are salient events, retail investors make attention-induced bets on price continuation following trading pauses. Moreover, market participants anticipate such ex-post behavior and incur buying (selling) pressure near upper (lower) price limits ex-ante. This causes price limit hits to be more frequent and harms price stability near limit thresholds. Trading pauses also become a window of wealth transfer from retail to institutional investors.