Odd Lot Theory
Barron's Finance & Investment Dictionary:
Top
Odd Lot Theory
historical theory that the Odd Lot investor—the small personal investor who trades in less than 100-share quantities— is usually guilty of bad timing and that profits can be made by acting contrary to odd-lot trading patterns. Heavy odd-lot buying in a rising market is interpreted by proponents of this theory as a sign of technical weakness and the signal of a market reversal. Conversely, an increase of odd-lot selling in a declining market is seen as a sign of technical strength and a signal to buy. In fact, analyses of odd-lot trading over the years fail to bear out the theory with any real degree of consistency, and it has fallen into disfavor in recent years. It is also a fact that odd-lot customers generally, who tend to buy market leaders, have fared rather well in the upward market that has prevailed over the last fifty years or so.
See also odd-lot short-sale ratio.
See also odd-lot short-sale ratio.
| Odd-Lot Short-Sale Ratio, Odd-Lot Dealer | |
| Off-Balance-Sheet Financing, Off-Board |
Investopedia Financial Dictionary:
Top
Odd Lot Theory
A technical analysis theory/indicator based on the assumption that the small individual investor is always wrong. Therefore, if odd lot sales are up - that is small investors are selling stock - it is probably a good time to buy.
Investopedia Says:
This approach assumes small investors have a low risk tolerance and tend not to hold a stock for the long-term.
Related Links:
If a company is strong enough to survive tough times, it is more likely to provide long-term value. Do Your Investments Have Short-Term Health?
Clear and honest financial statements not only reflect value, they also help ensure it. The Importance Of Corporate Transparency
Different clients require different research reports. Which type of analyst do you need? Testing 3 Types Of Analysts
Analyzing a variety of markets around the world can provide powerful insight into trading opportunities. The Advantage of Intermarket Analysis
Finding good stocks can be like finding a needle in a haystack. But these invaluable tools can help. Getting To Know Stock Screeners
Stocks that go down must come up, right? Wrong. We bust this and four other common market misconceptions. The 5 Biggest Stock Market Myths
Avoid making these 7 investing mistakes to dodge unnecessary losses in your portfolio 7 Forehead-Slapping Stock Blunders
Post a question - any question - to the WikiAnswers community:
Copyrights:
Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
Read more
