Trading on Long-Term Information

57 Pages Posted: 13 Jul 2019 Last revised: 13 Oct 2020

See all articles by Corey Garriott

Corey Garriott

TMX Group

Ryan Riordan

Queen's University - Smith School of Business

Date Written: October 1, 2020

Abstract

Predatory trading can discourage investors from gathering information and trading on it. However, using 11 years of equity trading data, we do not find evidence that informed investors are being discouraged. They have roughly constant volumes and profits through the sample. They are sophisticated, trading patiently over weeks and timing their trades to achieve negative price impacts, leaving price efficiency unchanged. We identify shorter-term traders and, in contrast to theoretical assumptions, find that they supply liquidity by trading in the opposite direction of the informed. Inefficient prices may come from informed investors' sophisticated trading and not from predatory short-term trading.

Keywords: Strategic trading, informed trading, price efficiency

JEL Classification: G20, G14, L10

Suggested Citation

Garriott, Corey and Riordan, Ryan, Trading on Long-Term Information (October 1, 2020). Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3419065 or http://dx.doi.org/10.2139/ssrn.3419065

Corey Garriott (Contact Author)

TMX Group ( email )

130 King St W
Toronto, Ontario M5X 2A2
Canada

Ryan Riordan

Queen's University - Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
136
Abstract Views
973
rank
250,548
PlumX Metrics