On the Irrelevance of Trade Timing

Lones Smith

Working papers from Massachusetts Institute of Technology (MIT), Department of Economics

Abstract: Given standard, transparent assumptions, this paper questions the Wall Street adage that 'timing is everything'. I show that for an Arrow security, a 'small' risk-neutral trader with private information that is conditionally independent of the public information is exactly indifferent about the timing of his trade: His expected return per dollar invested is a martingale. This is true despite the fact that he expects the asset price itself to rise given favorable information and fall given unfavorable information.

Keywords: TRADE; INFORMATION; STOCK MARKET; FINANCIAL MARKET; SHAREHOLDERS (search for similar items in EconPapers)
JEL-codes: D80 D82 G10 G11 G19 (search for similar items in EconPapers)
Pages: 13 pages
Date: 1996
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