Trading on Short-Term Information

Alexander Gümbel
Authors registered in the RePEc Author Service: Alexander Guembel ()

Journal of Institutional and Theoretical Economics (JITE), 2005, vol. 161, issue 3, 428-452

Abstract: This paper shows that investors may want fund managers to acquire and trade on short-term instead of more profitable long-term information. This improves learning about managerial ability from performance observations, for two reasons. Firstly, short-term information is of higher quality, which allows the investor to draw sharper inferences over a manager's type. Secondly, performance observations under long-term informed trade are contaminated by noise contained in prices, which further weakens inference. The paper thus explicitly links the degree of short-term information dissemination to the profitability and the learning implications of short-term versus long-term informed trading.

JEL-codes: D82 D83 G14 G23 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (2)

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Working Paper: Trading on Short-Term Information (1999)
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