Retail Traders and Market Informational Efficiency: Evidence From Distractive TV Events

We investigate the role of retail traders on market informational efficiency. The literature is inconclusive about characterizing retail trades in terms of these trades’ informativeness. Also, their well-documented role in liquidity can mediate the effects on efficiency. Major Australian TV events are used as exogenous shocks to retail traders’ attention. These shocks provide a repeated natural experiment. Results indicate that informational efficiency slightly improves on distraction days despite attenuation in liquidity.