Big elephants in small ponds: Do large traders make financial markets more aggressive?
No 77, Volkswirtschaftliche Diskussionsbeiträge from University of Kassel, Faculty of Economics and Management
Market participants often suspect that large traders have a disproportionate effect on financial markets, increasing the aggressiveness of market responses. Prior studies have shown that the impact of a large trader on a currency crisis depends positively on his size and informational position. By contrast, this article highlights the role that market sentiment has on the impact of a large trader. If the market believes that fundamentals are weak, then the probability of a crisis depends positively on the trader's size but negatively on the precision of his information, with these effects reversed in a generally optimistic market. A large player, therefore, need not make market responses more aggressive.
Keywords: currency crises; large traders; market sentiment; coordination; private and public information (search for similar items in EconPapers)
JEL-codes: D82 F31 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: Big elephants in small ponds: Do large traders make financial markets more aggressive? (2005)
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:zbw:kasvdb:77
Access Statistics for this paper
More papers in Volkswirtschaftliche Diskussionsbeiträge from University of Kassel, Faculty of Economics and Management Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().