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Plen. pres. 1: Plenary presentation: "Animal spirits on steroids: Evidence from retail options trading"
Time:
Monday, 25/Aug/2025:
4:00pm - 4:30pm
Location:Aida Conference hall
Meeting hall “Aida”, which can accommodate up to 180 people
Presentations
Animal Spirits on Steroids: Evidence from Retail Options Trading in India
Prof. Vikas Agarwal1, Prof. Pulak Ghosh2, Prof. Nagpurnanand Prabhala3, Prof. Haibei Zhao4
1Georgia State University, United States of America; 2Indian Institute of Management Bangalore; 3John Hopkins University; 4Lehigh University
We analyze a market-wide panel dataset on retail option trading from India, which has an 80% share in option contracts traded worldwide. Retail participation is concentrated in and dominates index options trading. Traders exhibit short-term speculative behavior with significant day trading, short-duration directional bets, especially as options converge to 0DTE, and make significant losses. Three natural experiments show that financial constraints and lottery-like preferences shape investor behavior. An exogenous increase in the supply of short-maturity options induces trading. Lot-size increases and delivery margins trying to curb speculation are offset by speculative shifts to small ticket-size, riskier options. While stock market participation increases welfare in canonical household finance models, it can also entrench speculative behavior that is difficult to undo.
