Definition of Odd Lot theory

Odd Lot theory is a contrarian theory that states that small investors will invariably buy and sell at the wrong time.

Applying "Odd Lot theory" to Securities Exams:

Odd Lot theory states that investors who cannot afford to purchase and sell stock in round lots are often less sophisticated and have access to less information and will purchase and sell shares at the wrong time. A high level of odd lot purchases would indicate a market top. A high level of odd lot sell orders would indicate a market bottom.

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