Nominal Price (Dis)illusion: Fractional Shares on Neobroker Trading Platforms

Publikation: Vorabdruck/Dokumentation/BerichtVorabdruck (Preprint)


We investigate neobrokerage traders' preferences for low nominal prices. We hypothesize that innovations such as zero-cost commission and corporate news alerts amplify nominal price illusion biases. We find supportive evidence for a more powerful response than documented in the literature for regular exchanges, using exogenous interventions of stock splits on Robinhood. Surprisingly, one innovation changes everything: the introduction of fractional shares. It eliminates previously amplified effects, while short-term herding behavior based on company news and momentum remains. Our findings primarily support the trading constraints hypothesis over the cognitive bias hypothesis to explain the nominal price illusion.


PublikationsstatusVeröffentlicht - 4 Dez. 2023
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  • Nominal Price Illusion, Fractional Shares, Stock Splits, Robinhood