Retail Investors Analyzing Stock Market Trends

Decoding Retail Investor Trends: Are They Still Market Movers in 2024?

Elliot Brynn in Business & Economy December 2025 • 4 min read.

"A fresh look at how retail investor behavior impacts stock market returns, challenging old assumptions and exploring new strategies for today's dynamic market."

The role of retail investors in shaping stock market trends is a subject of ongoing debate. Are they astute market predictors, or are their decisions often missteps? While early research questioned their impact, more recent studies suggest that retail investor activity can indeed influence future stock returns. A pivotal study by Boehmer, Jones, Zhang, and Zhang (BJZZ, 2021) highlighted the predictive power of retail order imbalance (ROI).

The BJZZ study, using U.S. equity market data from 2010 to 2015, found that retail investors tend to act as contrarians on a weekly basis, and that imbalances in their orders can forecast returns over the following weeks. To identify retail trades, BJZZ developed an algorithm using NYSE Trade and Quote (TAQ) data, focusing on off-exchange transactions with subpenny price improvements—a method that has gained considerable traction.

Despite its popularity, the BJZZ approach has faced scrutiny, with researchers like Battalio et al. (2023) and Barber et al. (2023a) questioning its accuracy. These critiques point to potential errors in identifying retail trades, prompting exploration of alternative methods like the quote midpoint (QMP) approach. This article delves into a reassessment of the BJZZ findings, examining their robustness in more recent data and under different methodological lenses.

Do Retail Order Imbalances Still Predict Stock Returns?

Retail Investors Analyzing Stock Market Trends

A new study revisits the seminal work of Boehmer et al. (2021) to determine if retail order imbalance (ROI) continues to predict future stock returns in the current market environment. The research first replicates BJZZ's original analysis from 2010-2015 and then extends the analysis to a more recent period of 2016-2021.

The findings reveal a significant shift in the predictive power of ROI. The study found that the ROI's ability to forecast future returns has weakened considerably. In particular, the capacity of past ROI to predict weekly returns on large-cap stocks has diminished, and long-short strategies based on ROI are no longer consistently profitable. This suggests that the relationship between retail investor behavior and stock market returns may not be as straightforward as previously thought.

ROI Predictive Power Weakens: The study demonstrates that ROI's ability to predict stock market behavior is not as potent as previously believed.
Large-Cap Stocks Less Predictable: The original findings are sensitive to the sample period and the approach to identify ROIs.
Long-Short Strategies Less Reliable: Investment strategies depending on ROI may not yield results.

The research also explores the impact of using the alternative quote midpoint (QMP) method to identify and sign retail trades. While the QMP method aligns with BJZZ's findings in the 2010-2015 period, the two methods diverge in their conclusions for 2016-2021. This suggests that the way retail trades are identified can significantly influence the results of studies examining their impact on stock returns.

Key Takeaways for Investors

This research underscores the dynamic nature of financial markets and the importance of continually reassessing established assumptions. As market conditions evolve, the predictive power of indicators like retail order imbalance can shift, requiring investors to adapt their strategies accordingly. While retail investors undoubtedly play a role in shaping market trends, their influence may be more nuanced and less predictable than previously thought.

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This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.2139/ssrn.4703056,

Title: Revisiting Boehmer Et Al. (2021): Recent Period, Alternative Method, Different Conclusions

Subject: q-fin.tr q-fin.gn

Authors: David Ardia, Clément Aymard, Tolga Cenesizoglu

Published: 25-03-2024

Everything You Need To Know

What is retail order imbalance (ROI), and why was it considered important in predicting stock market trends?

Retail order imbalance (ROI) represents the difference between the volume of buy orders and sell orders placed by retail investors. The study by Boehmer, Jones, Zhang, and Zhang (BJZZ, 2021) suggested that imbalances in these orders could forecast stock returns over subsequent weeks, implying that retail investors acted as contrarians. ROI gained traction as a potential indicator of market sentiment and future price movements because the BJZZ study showed retail investors can predict stock returns.

According to recent research, has the predictive power of retail order imbalance (ROI) changed since the original BJZZ study?

Yes, a new study revisiting the work of Boehmer et al. (2021) found that the predictive power of retail order imbalance (ROI) has weakened considerably in more recent years (2016-2021). The ability of past ROI to predict weekly returns, especially on large-cap stocks, has diminished, and long-short strategies based on ROI are no longer consistently profitable. The study indicates that ROI's effectiveness is sensitive to sample period and approach to identify ROIs.

What is the quote midpoint (QMP) approach, and how does it compare to the BJZZ method for identifying retail trades?

The quote midpoint (QMP) approach is an alternative method used to identify and classify retail trades. While it aligns with the BJZZ method in the 2010-2015 period, the two methods diverge in their conclusions for 2016-2021. This divergence suggests that the way retail trades are identified can significantly influence the results of studies examining their impact on stock returns.

What are the implications of the changing predictive power of retail order imbalance (ROI) for investors?

The weakening predictive power of retail order imbalance (ROI) highlights the dynamic nature of financial markets. Investors should continually reassess established assumptions and adapt their strategies accordingly. Investment strategies heavily dependent on ROI may not yield expected results, and investors should consider that the influence of retail investors may be more nuanced and less predictable than previously thought. The fact that the BJZZ model results are not repeatable means that the market dynamics have changed and the model is not robust to these changes.

Besides retail order imbalance (ROI), what other factors might influence stock market returns, and how can investors stay informed about these evolving dynamics?

While retail order imbalance (ROI) provides insights into potential market trends, various other factors also significantly influence stock market returns. These include macroeconomic indicators such as GDP growth, inflation rates, and interest rate policies set by central banks. Corporate earnings, technological advancements, geopolitical events, and shifts in investor sentiment also play crucial roles. Investors can stay informed by continuously monitoring financial news, economic reports, and academic research. Employing diverse analytical tools and strategies, while remaining adaptable to evolving market conditions, is essential for making well-informed investment decisions. Further research that builds upon the BJZZ model should be done.