Fractional Trading.

This article examines the impact of fractional trading (FT)—the ability to buy less than a whole share—on retail investor behavior and stock market dynamics in the U.S. equity markets following its introduction in late 2019. The study finds that FT significantly increases the volume of tiny trades, especially in high-priced stocks (those priced above $100), by enabling capital-constrained retail investors, predominantly Millennials and Generation Z, to access and trade these stocks. This surge in fractional trading correlates with heightened retail attention, social media discussions, and notable price pressure on high-priced stocks, sometimes leading to meme-stock-like trading frenzies and price bubbles. The research further suggests that these effects are amplified in stocks with lower institutional ownership and are consistent with a feedback mechanism where rising prices attract more capital, fueling further speculation. While FT democratizes access to high-priced stocks and broadens market participation, it also introduces greater price volatility linked to coordinated retail trading during attention spikes.