odd-lot theory investment & finance definition

The technical theory that holds that an investor should make investment decisions contrary to what the odd-lotters, on balance, are doing. For example, if odd-lot sales exceed odd-lot purchases, the odd-lot theory says that the smart investor should buy. Conversely, if odd-lot purchases exceed odd-lot sales, the theory says that the smart investor should sell. The odd-lot theory is based on the premise that small investors who trade in odd lots tend to make the wrong decisions.