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
Date Written: April 7, 2010
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: Suggested Citation