Trading on Long-term Information
Corey Garriot and
Authors registered in the RePEc Author Service: Corey Garriott ()
Staff Working Papers from Bank of Canada
Predatory trading discourages informed investors from gathering information and trading on it. However, using 11 years of equity trading data, we do not find evidence that informed investors are being discouraged. They have roughly constant volumes and profits through the sample. They are sophisticated, trading patiently over weeks and timing their trading to achieve negative price impacts, leaving price efficiency unchanged. We identify shorter-term traders and, in contrast to theory, find that they supply liquidity by trading in the opposite direction of the informed. Inefficient prices may be the result of informed investors' sophisticated trading and not of predatory short-term trading.
Keywords: Financial institutions; Financial markets; Market structure and pricing (search for similar items in EconPapers)
JEL-codes: G20 L1 (search for similar items in EconPapers)
Pages: 57 pages
New Economics Papers: this item is included in nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:20-20
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