In this Globe and Mail column, I look at how fractional share trading helps eliminate one common investor bias (nominal price illusion) only to potentially amplify others. A new study found that once platforms let users buy slices of expensive stocks, the frenzy around stock splits faded (a good thing). But there’s a flip side. By removing affordability as a barrier, these apps may be encouraging more impulsive, casino-like trading behaviour (not a good thing). Fractional shares democratize access, yes. But they also lower the friction for bad decisions.
Fractional trading’s mixed blessing for small investors: democracy or digital casino?
While fractional trading kills one source of irrational behaviour, it can exacerbate others
Preet Banerjee
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