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To Trade or Not to Trade? Informed Trading with Short-Term Signals for Long-Term Investors

Posted: 8 Apr 2010 Last revised: 27 Jan 2017

Roni Israelov

AQR Capital Management, LLC

Michael Katz

AQR Capital Management, LLC

Multiple version iconThere are 2 versions of this paper

Date Written: April 7, 2010

Abstract

When a long-term investor trades a slowly changing portfolio, she is not very time sensitive to when she should place or modify her bet. Short-term information can be used to guide the investor on how to time her trades. Strategic trade modification provides exposure to short-term signals without having to pay additional transaction costs and without capacity limits. Long-term investors should no longer ignore short-term information just because it is too expensive to trade on.

Keywords: High Frequency, Short-Term, Long-Term, Trading, Trading Costs, Transaction Costs, Turnover, Liquidity, Informed Trading, Optimal Portfolio, Portfolio Choice, Rebalance

JEL Classification: G10, G11, G12, G19

Suggested Citation

Israelov, Roni and Katz, Michael, To Trade or Not to Trade? Informed Trading with Short-Term Signals for Long-Term Investors (April 7, 2010). Available at SSRN: https://ssrn.com/abstract=1585816

Roni Israelov (Contact Author)

AQR Capital Management, LLC ( email )

Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
United States

HOME PAGE: http://www.aqrcapital.com

Michael Katz

AQR Capital Management, LLC ( email )

Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
United States
203 742 3854 (Phone)
203 742 3354 (Fax)

HOME PAGE: http://www.aqr.com

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