Strategic trading against retail investors with disposition effects
Jun Wang and
Additional contact information
Jouahn Nam: Pace University
Jun Wang: Baruch College
Ge Zhang: University of New Orleans
No 2004-11, Working Papers from University of New Orleans, Department of Economics and Finance
In this paper, we study a model incorporating the retail trader’s reluctance to sell into losses. We show that in this setup the informed trader always buys the asset when he receives a favorable signal. However, when the informed trader receives an unfavorable signal, he may not always sell the asset if the signal is moderately bad and the retail trader is reluctant to realize losses. Hence the good news travels faster than the bad news and the asset price exhibits steady climbs with sharp and sudden drops.
Keywords: Disposition effect; Retail investors; Strategic trading (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-rmg
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to louisdl.louislibraries.org:80
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:uno:wpaper:2004-11
Access Statistics for this paper
More papers in Working Papers from University of New Orleans, Department of Economics and Finance Contact information at EDIRC.
Series data maintained by Janet Murphy Crane ().