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Predatory Trading

Lasse Pedersen and Markus Brunnermeier ()

No 425, Econometric Society 2004 North American Winter Meetings from Econometric Society

Abstract: This paper studies predatory trading: trading that induces and/or exploits other investors' need to reduce their positions. We show that if one trader needs to sell, others also sell and subsequently buy back the asset. This leads to price overshooting, and a reduced liquidation value for the distressed trader. Hence, the market is illiquid when liquidity is most needed. Further, a trader pro ts from triggering another trader's crisis, and the crisis can spill over across traders and across assets

Keywords: asset; pricing (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2004-08-11
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http://pages.stern.nyu.edu/~lpederse/papers/predatory_trading.pdf main text (application/pdf)

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Journal Article: Predatory Trading (2005) Downloads
Working Paper: Predatory Trading (2004) Downloads
Working Paper: Predatory Trading (2004) Downloads
Working Paper: Predatory trading (2003) Downloads
Working Paper: Predatory Trading (2003) Downloads
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