EconPapers    
Economics at your fingertips  
 

Predatory Trading

Markus Brunnermeier () and Lasse Pedersen

No 10755, NBER Working Papers from National Bureau of Economic Research, Inc

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 markets.

JEL-codes: G0 G1 (search for similar items in EconPapers)
Date: 2004-09
New Economics Papers: this item is included in nep-fin
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Published as Markus K. Brunnermeier & Lasse Heje Pedersen, 2005. "Predatory Trading," Journal of Finance, American Finance Association, vol. 60(4), pages 1825-1863, 08.

Downloads: (external link)
http://www.nber.org/papers/w10755.pdf (application/pdf)

Related works:
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
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:nbr:nberwo:10755

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10755

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-05-21
Handle: RePEc:nbr:nberwo:10755