Predatory Trading

Markus Brunnermeier and Lasse Heje Pederson

FMG Discussion Papers from Financial Markets Group

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 profits from triggering another trader's crisis, and the crisis can spill over across traders and across assets.

Date: 2003-03
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmgdps/DP441.pdf (application/pdf)

Related works:
Journal Article: Predatory Trading (2005)
Working Paper: Predatory Trading (2004)
Working Paper: Predatory Trading (2004)
Working Paper: Predatory Trading (2004)
Working Paper: Predatory trading (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fmg:fmgdps:dp441

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().