Rawley Z. Heimer
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Research › Retail investing and brokerage

Retail investing and brokerage

How individual investors behave in financial markets, why they so often trade against their own interests, and how leverage limits, brokerage practices, and social networks change their outcomes.

Related terms: leverage and margin limits, retail foreign exchange, brokerage commissions, the disposition effect, loss chasing, social trading platforms, active versus passive investing.

Published papers

  1. Dynamic Inconsistency in Risky Choice: Evidence from the Lab and Field

    With Zwetelina Iliewa, Alex Imas, and Martin Weber. American Economic Review.

    People plan to keep taking risk after gains and stop after losses, but in practice they cash out gains early and chase losses.

  2. Biased by Choice: How Financial Constraints Can Reduce Financial Mistakes

    With Alex Imas. Review of Financial Studies.

    Limits on borrowing can make investors better off by curbing their behavioral biases.

  3. Should Retail Investors’ Leverage Be Limited?

    With Alp Simsek. Journal of Financial Economics.

    Capping how much leverage retail traders can use made them better off without harming market liquidity.

  4. Peer Pressure: Social Interaction and the Disposition Effect

    Review of Financial Studies.

    Gaining access to a social trading network nearly doubles a trader’s tendency to sell winners and hold on to losers.

  5. Friends Do Let Friends Buy Stocks Actively

    Journal of Economic Behavior and Organization.

    Social interaction is more common among active traders than among passive investors.

  6. Facebook Finance: How Social Interaction Propagates Active Investing

    With David Simon. Federal Reserve Bank of Cleveland Working Paper 15-22.

    Active trading strategies spread through social networks of retail traders, even though the network reveals how rarely they succeed.

Working papers

  1. Brokerage Commissions and Trading Volume: Lessons from the 20th Century

    With Valeria Fedyk. Draft available on request.

    Under fixed NYSE commission schedules, higher commissions led to more trading, consistent with brokers steering investors toward high-commission stocks.

Other research topics