- Odd lotter
An odd lotter is an investor who purchases shares or other securities in small or unusual quantities. Stocks are typically traded in increments of 100 shares, a quantity known as a round lot or board lot. The cost of 100 shares 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.
Odd lot theory
Odd lotters were central to a historical theory of technical analysis known as odd lot theory. Odd lot theory was predicated on the belief that one could outperform the stock market by identifying the least-informed investors and making investments opposite to them. (If the least-informed investors were selling, it was generally a good time to buy, and vice versa.)
Assuming that odd lotters were generally smaller investors with little market knowledge, practitioners of odd lot theory identified the actions of odd lotters and did the opposite. The actions of odd lotters were interpreted as contrary signals.
The theory is no longer popular as analysis of data shows little evidence that the method works. According to Princeton University economist Burton Malkiel: "It turns out that the odd-lotter isn't such a stupendous dodo after all. A little stupid? Maybe. There is some indication that the performance of odd-lotters might be slightly worse than the stock averages. However, the available evidence indicates that knowledge of odd-lotters' actions is not useful for the formulation of investment strategies."
The theory was the subject of much analysis in the 1960s and 1970s. By the 1990s, however, the theory had fallen out of use. In addition to the theory's general ineffectiveness, more and more individuals began to invest in mutual funds instead of individual stocks.
The term odd lot existed prior to use in finance and is used outside the financial industry for any irregular packaging in a general and objective sense.
- ^ Investopedia definition of odd lotter
- ^ Investopedia definition of round lot
- ^ Investopedia definition of odd lot
- ^ a b Malkiel, Burton G. (2007). A Random Walk Down Wall Street (9th ed.). W. W. Norton. pp. 140–41. ISBN 0393062457.
- ^ Investopedia definition of Odd lot theory
- ^ Bloomberg.com glossary entry for Odd lot theory
- ^ Laura Pederson (July 21, 1996). "Minding Your Business; In Search of the Best Market Barometer". The New York Times. http://query.nytimes.com/gst/fullpage.html?res=9B06EEDE1639F932A15754C0A960958260&sec=&spon=&pagewanted=all. Retrieved on August 11, 2008.
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odd-lotter — ˈädˈläd.ə(r) noun ( s) Etymology: odd lot + er (II) : a speculator or an investor who habitually buys and sells stock in less than round lots * * * /od lot euhr/, n. a person who buys or sells odd lots. Also, odd lotter. [1965 70; ODD LOT + ER … Useful english dictionary
odd-lotter — /od lot euhr/, n. a person who buys or sells odd lots. Also, odd lotter. [1965 70; ODD LOT + ER1] * * * … Universalium
Odd Lotter — An individual investor who buys securities, usually stocks, in odd lots. This is the opposite of someone who buys securities in round lots. A round lot is 100 stocks; therefore, someone buying any number that is not a multiple of 100 would be… … Investment dictionary
odd-lotter — odd lot·ter … English syllables
Odd lot (disambiguation) — Odd lot may refer to: Odd lotter, an investor who purchases shares or other securities in small or unusual quantities Odd Lots, a retail store; see Big Lots Odd Lot Entertainment, American production company This disambiguation page lists… … Wikipedia
round-lotter — /rownd lot euhr/, n. a buyer or seller of round lots. Cf. odd lotter. [ROUND LOT + ER1] * * * … Universalium
round-lotter — /rownd lot euhr/, n. a buyer or seller of round lots. Cf. odd lotter. [ROUND LOT + ER1] … Useful english dictionary
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