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Odd Lot

What is an 'Odd Lot'

An odd lot is an order amount for a security that is less than the normal unit of trading for that particular asset. Odd lots are considered to be anything less than the standard 100 shares for stocks. Trading commissions for odd lots are generally higher on a percentage basis than those for standard lots, since most brokerage firms have a fixed minimum commission level for undertaking such transactions.

Explaining 'Odd Lot'

Odd lots may inadvertently arise in an investor's portfolio through reverse splits or dividend reinvestment plans. For example, a one-for-eight reverse split of a security, of which the investor holds 200 shares, will result in a post-split amount of 25 shares. While trading commissions for odd lots may still be higher than for standard lots on a percentage basis, the popularity of online trading platforms and the consequent plunge in brokerage commissions means that it is no longer as difficult or expensive for investors to dispose of odd lots as it used to be in the past.

Odd Lots, Round Lots and Mixed Lots

While odd lots can include any number of shares between one and 100, a round lot is any lot of shares that can be evenly divided by 100. For example, 75 shares would be an odd lot since it is below 100 shares, while 300 shares would be a round lot since it can be evenly divided by 100.

Issuing Company Actions on Odd Lots

Since an odd lot is considered fairly insignificant to larger institutions, a company may choose to eliminate any odd holdings from the marketplace. This can include buying out the associated shareholder at a premium, offering additional shares to the shareholder to create a round lot, or engaging in a reverse split designed to result in the odd lot becoming equivalent to less than one share to pay the investor cash for a residual holding.


Further Reading


Odd-lot transactions around the turn of the year and the January effect
www.jstor.org [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …

What's not there: The odd-lot bias in TAQ dataWhat's not there: The odd-lot bias in TAQ data
papers.ssrn.com [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …

Odd-lot trading in US equitiesOdd-lot trading in US equities
www.sciencedirect.com [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …

Technology and learning: Automating odd-lot trading at the New York Stock Exchange, 1958–1976Technology and learning: Automating odd-lot trading at the New York Stock Exchange, 1958–1976
www.jstor.org [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …

Economic experiments and the construction of marketsEconomic experiments and the construction of markets
books.google.com [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …

Odd-Lot Trading in the Stock Market and Its Market ImpactOdd-Lot Trading in the Stock Market and Its Market Impact
www.jstor.org [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …

Do measures of investor sentiment predict returns?Do measures of investor sentiment predict returns?
www.jstor.org [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …

Odd-lot Costs and Taxation Arguments for the Ex-date Price Effects of Stock DividendsOdd-lot Costs and Taxation Arguments for the Ex-date Price Effects of Stock Dividends
papers.ssrn.com [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …

Investor sentiment and stock returns: Evidence from TurkeyInvestor sentiment and stock returns: Evidence from Turkey
www.tandfonline.com [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …

Unrecognized odd lot liquidity supply: A hidden trading cost for high priced stocksUnrecognized odd lot liquidity supply: A hidden trading cost for high priced stocks
jot.pm-research.com [PDF]
… 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 … Relationship between Return and Market Value of Common Stocks." Journal of Financial Economics, 9 (March …



Q&A About Odd Lot


What is an odd lotter?

An odd lotter is an investor who purchases shares or other securities in small or unusual quantities.

What happens when you have an odd holding in a company's stock?

The company may buy out the shareholder at a premium, offer additional shares to the shareholder to create a round lot, or engage in a reverse split designed to result in the odd lot becoming equivalent to less than one share.

Who were considered least informed investors?

The least informed investors were considered those who sold their shares at low prices and bought at high prices; thus it was generally good time to buy when they sold and vice versa.

What is an odd lot?

An odd lot is a trade amount for a security that is less than the normal unit of trading for that particular asset.

How are stocks typically traded?

Stocks are typically traded in increments of one share, a quantity known as a round lot or board lot. The cost of one share of a security may be beyond the means of an individual investor, or may represent a larger investment than the investor wishes to make. Thus, the investor purchases an odd lot.

Who did practitioners identify as being most likely to sell at low prices and buy at high prices?

Practitioners identified those who sold their shares at low prices and bought at high prices as those with little market knowledge—odd lotters.

Is an odd lot always one share?

No, it can be any number of shares between one and one.

What was central to historical odd-lot theory?

Odd-lotters were central to historical odd-lot theory, which was predicated on the belief that one could outperform the stock market by identifying the least-informed investors and making investments opposite to them.

What did practitioners do based on what they believed about these people's actions?

Practitioners interpreted these actions as contrary signals; if they saw that someone had sold his/her shares for a low price (and thus might be willing to buy again soon), then he/she would buy more shares himself/herself since this person was not likely knowledgeable enough about trading stocks well enough to know when it would be best time for him/her personally to sell his/her own stock holdings. If he/she saw that someone had bought for a high price (and thus might be willing to sell again soon), then

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