Abstract
The COVID-19 pandemic substantially impacted many aspects of regular life including financial markets. The increased media attention and slowdown associated with the pandemic provide the opportunity to explore how both institutional and retail traders react to an attention-grabbing event. We examine how the market responded to a unique presidential press conference including CEOs of eight publicly-listed U.S. companies addressing the U.S.’s response to the pandemic. Using the press conference on March 13, 2020, we examine the effect on the trading volatility and returns for each of the eight companies represented. We find positive abnormal returns for the companies participating in the press conference. Using the Robintrack data aggregated from the Robinhood retail trading platform and intraday TAQ data, we see that both retail and institutional trading volume increased on the press conference day. However, the increase in retail trading approximately doubled the increase in institutional trading. For the two companies with the lowest Robinhood user ownership prior to the press conference, ownership more than doubled within an hour of the press conference. Panel VAR analysis including control firms shows the press conference resulted in significant intraday returns, volume, and buy-order imbalances in participating firms’ stock.
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Data availability
Robintrack data is available publicly from https://robintrack.net/data-download. Other data utilized is from NYSE Trade and Quote database and CRSP database.
Notes
The press conference is available to view in its entirety, as well as a full transcript of the press conference, via https://trumpwhitehouse.archives.gov/briefings-statements/remarks-president-trump-vice-president-pence-members-coronavirus-task-force-press-conference-3/
Brokerage firms may internally settle non-directed orders for retail clients, but must report the transaction to the Trade Reporting Facility (TRF) and provide a price improvement relative to the prevailing National Best Bid or Offer (NBBO). Such trades are coded in TAQ with exchange code “D” and generally have sub-penny improvements on the NBBO price (often 1/10th of a penny). We process TAQ data in accordance with Box et al. (2021), with trades divided into retail (Boehmer et al. 2021) or institutional (non-retail trades) and classified into buyer or seller initiated based on whether they are executed above or below the quote midpoint.
Industry portfolio volume is measured as the market capitalization value-weighted mean volume of all firms in the same two-digit SIC code, excluding The Participant firms, with market capitalization measured at the close of trading the prior trading day.
For a discussion of applying vector autoregresion in a panel setting, please see Abrigo and Love (2016).
Panel VAR assumes endogenous variables are continuous, unbounded, and normally distributed. Box et al. (2021) use a symmetrically logged excess volume measure to monotonically transform volume into distribution more appropriate for VAR.
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The authors do not have any conflicts of interest to disclose. No funding was received for conducting this study. The authors have no relevant financial or non-financial interests to disclose. The authors have chosen to be listed alphabetically due to similar levels of contribution to the study.
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Matthew Crook, Andrew Lynch, and Brian Walkup; Methodology: Matthew Crook, Andrew Lynch, and Brian Walkup; Formal analysis and investigation: Andrew Lynch and Brian Walkup; Writing – original draft presentation: Matthew Crook, Andrew Lynch, and Brian Walkup; Writing- review and editing: Matthew Crook, Andrew Lynch, and Brian Walkup.
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Crook, M.D., Lynch, A.A. & Walkup, B.R. Retail and institutional trading during a COVID-19 presidential press conference. J Econ Finan (2024). https://doi.org/10.1007/s12197-024-09663-0
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DOI: https://doi.org/10.1007/s12197-024-09663-0