| Abstract: |
The Securities and Exchange Commission (SEC) publicly declares its dedication to retail investors and their protection. Despite this, we do not know how retail investors view the SEC and whether their level of dis(satisfaction) with SEC performance alters the way they participate in financial markets. We develop a measure of aggregate retail investor perception of the SEC using high-frequency Twitter data. Broadly, we show that (1) retail investors’ perception of the SEC varies considerably over time and (2) this perception affects their trading decisions. Specifically, we find that retail trading volume around earnings announcements is higher (lower) in periods when their perception of the SEC is positive (negative). Further, when retail investors hold a positive perception of the SEC, our evidence is consistent with retail investors relying on earnings information to a greater extent and with stock prices reacting more strongly to earnings information. Collectively, our results underscore the importance retail investors’ perception of the SEC and its efficacy in executing the mission to protect them.
Keywords: Retail Investors, Securities and Exchange Commission (SEC), Accounting Information, Regulation
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Biography:
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Austin is an Assistant Professor of Accounting at the University of Colorado Boulder. He aims to study relevant, real-world financial market phenomena with an emphasis on the creation and use of financial information by everyday people. His current research projects examine how individuals interact with financial market information in various settings such as mobile phone trading apps, fake financial news, ESG portfolio concerns, politics, and sports gambling markets. Austin currently teaches the introductory managerial accounting course (BCOR 2303) at Leeds. He received both his B.B.A. and Ph.D. degrees from the University of Iowa.
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