A Tale of Two Investors: Exploring Differences in Trading Behavior around Macroeconomic Announcements : A study of institutional and retail investors in the US market

Sperstad, Albert; Sperre, Håkon Jacobsen
Master thesis
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URI
https://hdl.handle.net/11250/3054317
Date
2022
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Abstract
We study whether the trading behaviour of institutional and retail investors differs on the

days surrounding key macroeconomic announcements, and the impact of this difference

on equity premiums earned. Through analysis of trading data from the 50 largest US

companies between January 2017 and October 2022, we find a significant difference of 2.11

pp in order imbalances two days prior to announcements. Further, we find a significant

difference of 2.06 pp in the equity premiums earned by institutions and retail investors on

the day after announcements. We attribute these differences to the higher risk appetite of

institutional investors and the slower reaction times and higher attention-sensitivity of

retail investors.