What is '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.

Explaining 'Odd Lot Theory'

This approach assumes small investors have a low risk tolerance and tend not to hold a stock for the long-term.

Further Reading

What's not there: The odd-lot bias in TAQ data
papers.ssrn.com [PDF]
… Theoretical evidence regarding the tax motive for trading is reported in Dyl (1979) and Constantinides (1983) … and buying activity that cause the ratios of sales to purchases of odd lots to change … We assume that odd-lot trading is a good proxy for trading by individual investors …

Odd-Lot Trading in the Stock Market and Its Market Impact
www.jstor.org [PDF]
… Theoretical evidence regarding the tax motive for trading is reported in Dyl (1979) and Constantinides (1983) … and buying activity that cause the ratios of sales to purchases of odd lots to change … We assume that odd-lot trading is a good proxy for trading by individual investors …

Technology and learning: Automating odd-lot trading at the New York Stock Exchange, 1958–1976
www.jstor.org [PDF]
… Theoretical evidence regarding the tax motive for trading is reported in Dyl (1979) and Constantinides (1983) … and buying activity that cause the ratios of sales to purchases of odd lots to change … We assume that odd-lot trading is a good proxy for trading by individual investors …

Do measures of investor sentiment predict returns?
www.jstor.org [PDF]
… Theoretical evidence regarding the tax motive for trading is reported in Dyl (1979) and Constantinides (1983) … and buying activity that cause the ratios of sales to purchases of odd lots to change … We assume that odd-lot trading is a good proxy for trading by individual investors …

A theory of price variability and trading volume: The case of odd-lot trading.
elibrary.ru [PDF]
… Theoretical evidence regarding the tax motive for trading is reported in Dyl (1979) and Constantinides (1983) … and buying activity that cause the ratios of sales to purchases of odd lots to change … We assume that odd-lot trading is a good proxy for trading by individual investors …

Investor sentiment and stock returns: Evidence from Turkey
www.tandfonline.com [PDF]
… Theoretical evidence regarding the tax motive for trading is reported in Dyl (1979) and Constantinides (1983) … and buying activity that cause the ratios of sales to purchases of odd lots to change … We assume that odd-lot trading is a good proxy for trading by individual investors …

Odd-lot trading in US equities
www.sciencedirect.com [PDF]
… Theoretical evidence regarding the tax motive for trading is reported in Dyl (1979) and Constantinides (1983) … and buying activity that cause the ratios of sales to purchases of odd lots to change … We assume that odd-lot trading is a good proxy for trading by individual investors …

Economic experiments and the construction of markets
books.google.com [PDF]
… Theoretical evidence regarding the tax motive for trading is reported in Dyl (1979) and Constantinides (1983) … and buying activity that cause the ratios of sales to purchases of odd lots to change … We assume that odd-lot trading is a good proxy for trading by individual investors …