Individual Investors, Electronic Trading and Turnover‪.‬

ABSTRACT We examine how changes in individual investors' cost for information and trading costs affect stock turnover, i.e., the portion of outstanding stock that trades during a specific period of time. We also test how individual investors with relatively short investment horizons affect turnover. We find that stock turnover increases when electronic trading becomes available to individual investors and that, while turnover is negatively correlated with individual investors' equity ownership, it is positively correlated with the level of electronic trading by individuals. This confirms the theory that investors trade relatively more actively when their costs of trading decline and provides further evidence that, when investors have the same trading costs and access to information, differences in their investment objectives leads to differences in their contribution to stock turnover.