EconPapers    
Economics at your fingertips  
 

Activism, Strategic Trading, and Liquidity

Kerry Back, Pierre Collin-Dufresne, Vyacheslav Fos, Tao Li and Alexander Ljungqvist ()

No 22893, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze dynamic trading by an activist investor who can expend costly effort to affect firm value. We obtain the equilibrium in closed form for a general activism technology, including both binary and continuous outcomes. Variation in parameters can produce either positive or negative relations between market liquidity and economic efficiency, depending on the activism technology and model parameters. Two results that contrast with the previous literature are that (a) the relation between market liquidity and economic efficiency is independent of the activist's initial stake for a broad set of activism technologies and (b) an increase in noise trading can reduce market liquidity, because it increases uncertainty about the activist's trades (the activist trades in the opposite direction of noise traders) and thereby increases information asymmetry about the activist's intentions.

JEL-codes: G3 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-mst
Note: AP CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Kerry Back & Pierre Collin‐Dufresne & Vyacheslav Fos & Tao Li & Alexander Ljungqvist, 2018. "Activism, Strategic Trading, and Liquidity," Econometrica, Econometric Society, vol. 86(4), pages 1431-1463, July.

Downloads: (external link)
http://www.nber.org/papers/w22893.pdf (application/pdf)

Related works:
Journal Article: Activism, Strategic Trading, and Liquidity (2018) Downloads
Working Paper: Activism, Strategic Trading, and Liquidity (2018) Downloads
Working Paper: Activism, Strategic Trading, and Liquidity (2017) Downloads
Working Paper: Activism, Strategic Trading, and Liquidity (2017) 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:22893

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w22893

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 2024-03-31
Handle: RePEc:nbr:nberwo:22893