Following behaviour and predatory trading

Shichao Yang, Shancun Liu, Qingduo Zeng and Zhigang Zhang

Applied Economics Letters, 2021, vol. 28, issue 13, 1125-1129

Abstract: We model the strategic interaction between the large investor and follower to explore the rationale of following behaviour and predatory trading. It is shown that the large investor behaves like a predator, and can prey on the follower with superior information. In addition, our study concludes that market liquidity and the informativeness of prices both increase with the precision of follower’s order signal.

Date: 2021
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DOI: 10.1080/13504851.2020.1803477

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