Informed arbitrage with speculative noise trading
We consider speculative noise trading when some naïve speculators trade on noise as if it were information [Black, F., 1986. Noise. Journal of Finance 41, 529–543]. We examine the optimal trading strategy of an informed investor who faces such naïve speculators in the market. We find that the inform...
Gespeichert in:
| Veröffentlicht in: | Journal of banking & finance 2010-02, Vol.34 (2), p.304-313 |
|---|---|
| 1. Verfasser: | |
| Format: | Artikel |
| Sprache: | eng |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Tags: |
Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
|
| container_end_page | 313 |
|---|---|
| container_issue | 2 |
| container_start_page | 304 |
| container_title | Journal of banking & finance |
| container_volume | 34 |
| creator | Albert Wang, F. |
| description | We consider speculative noise trading when some naïve speculators trade on noise as if it were information [Black, F., 1986. Noise. Journal of Finance 41, 529–543]. We examine the optimal trading strategy of an informed investor who faces such naïve speculators in the market. We find that the informed investor trades aggressively on her information and takes large, opposite positions against the naïve speculators. The trading volume is thereby drastically magnified. While such speculative noise trading enhances liquidity, it makes prices less efficient. The overall dynamic patterns that emerge from our model are most consistent with the evidence for interday variations in volume, volatility, and transaction costs. |
| doi_str_mv | 10.1016/j.jbankfin.2009.07.019 |
| format | Article |
| fullrecord | <record><control><sourceid>proquest_cross</sourceid><recordid>TN_cdi_proquest_miscellaneous_37240206</recordid><sourceformat>XML</sourceformat><sourcesystem>PC</sourcesystem><els_id>S0378426609001794</els_id><sourcerecordid>1901708691</sourcerecordid><originalsourceid>FETCH-LOGICAL-c522t-d700c31c1caaa9a1be498c7eb3464ad9d089b72f5ac7eca8d44dc17bec610ae53</originalsourceid><addsrcrecordid>eNqFkE9v1DAQxS0EEkvhK6CIA7ek4z9rJzdQRaHVSlzgbE3sSeuwmyx2dlG_fWe1LQcuWBrb8rz3NP4J8V5CI0Hay7EZe5x-DWlqFEDXgGtAdi_ESrZO1VY79VKsQLu2Nsra1-JNKSPwaqVeCXkzDXPeUaww92nJeEfVn7TcV2VP4bDFJR2pmuZUqOJmTNPdW_FqwG2hd0_nhfh5_eXH1bd68_3rzdXnTR3WSi11dABByyADInYoezJdGxz12liDsYvQdr1Twxr5MWAbjYlBup6ClYC01hfi4zl3n-ffByqL36USaLvFieZD8fwvAwosCz_8IxznQ554Ni8704FTVrLInkUhz6VkGvw-px3mBy_BnzD60T9j9CeMHpxnjGy8PRszMZG_LiIae9aiP3qN2vD2wKWA4zSm05Vrf-oBN6X298uOwz6dw4jBHRNlX0KiKVBMmcLi45z-N88jETOYFw</addsrcrecordid><sourcetype>Aggregation Database</sourcetype><iscdi>true</iscdi><recordtype>article</recordtype><pqid>194907261</pqid></control><display><type>article</type><title>Informed arbitrage with speculative noise trading</title><source>RePEc</source><source>ScienceDirect Journals (5 years ago - present)</source><creator>Albert Wang, F.</creator><creatorcontrib>Albert Wang, F.</creatorcontrib><description>We consider speculative noise trading when some naïve speculators trade on noise as if it were information [Black, F., 1986. Noise. Journal of Finance 41, 529–543]. We examine the optimal trading strategy of an informed investor who faces such naïve speculators in the market. We find that the informed investor trades aggressively on her information and takes large, opposite positions against the naïve speculators. The trading volume is thereby drastically magnified. While such speculative noise trading enhances liquidity, it makes prices less efficient. The overall dynamic patterns that emerge from our model are most consistent with the evidence for interday variations in volume, volatility, and transaction costs.</description><identifier>ISSN: 0378-4266</identifier><identifier>EISSN: 1872-6372</identifier><identifier>DOI: 10.1016/j.jbankfin.2009.07.019</identifier><identifier>CODEN: JBFIDO</identifier><language>eng</language><publisher>Amsterdam: Elsevier B.V</publisher><subject>Arbitrage ; Asymmetric information ; Discounts ; Financial speculation ; Heterogeneous prior beliefs ; Information ; Informed trading ; Informed trading Noise trading Asymmetric information Heterogeneous prior beliefs Liquidity Volume Volatility Transaction costs ; Investment policy ; Liquidity ; Noise ; Noise trading ; Securities trading volume ; Speculators ; Studies ; Transaction costs ; Volatility ; Volume</subject><ispartof>Journal of banking & finance, 2010-02, Vol.34 (2), p.304-313</ispartof><rights>2009 Elsevier B.V.</rights><rights>Copyright Elsevier Sequoia S.A. Feb 2010</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c522t-d700c31c1caaa9a1be498c7eb3464ad9d089b72f5ac7eca8d44dc17bec610ae53</citedby><cites>FETCH-LOGICAL-c522t-d700c31c1caaa9a1be498c7eb3464ad9d089b72f5ac7eca8d44dc17bec610ae53</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktohtml>$$Uhttps://dx.doi.org/10.1016/j.jbankfin.2009.07.019$$EHTML$$P50$$Gelsevier$$H</linktohtml><link.rule.ids>314,777,781,3537,3994,27905,27906,45976</link.rule.ids><backlink>$$Uhttp://econpapers.repec.org/article/eeejbfina/v_3a34_3ay_3a2010_3ai_3a2_3ap_3a304-313.htm$$DView record in RePEc$$Hfree_for_read</backlink></links><search><creatorcontrib>Albert Wang, F.</creatorcontrib><title>Informed arbitrage with speculative noise trading</title><title>Journal of banking & finance</title><description>We consider speculative noise trading when some naïve speculators trade on noise as if it were information [Black, F., 1986. Noise. Journal of Finance 41, 529–543]. We examine the optimal trading strategy of an informed investor who faces such naïve speculators in the market. We find that the informed investor trades aggressively on her information and takes large, opposite positions against the naïve speculators. The trading volume is thereby drastically magnified. While such speculative noise trading enhances liquidity, it makes prices less efficient. The overall dynamic patterns that emerge from our model are most consistent with the evidence for interday variations in volume, volatility, and transaction costs.</description><subject>Arbitrage</subject><subject>Asymmetric information</subject><subject>Discounts</subject><subject>Financial speculation</subject><subject>Heterogeneous prior beliefs</subject><subject>Information</subject><subject>Informed trading</subject><subject>Informed trading Noise trading Asymmetric information Heterogeneous prior beliefs Liquidity Volume Volatility Transaction costs</subject><subject>Investment policy</subject><subject>Liquidity</subject><subject>Noise</subject><subject>Noise trading</subject><subject>Securities trading volume</subject><subject>Speculators</subject><subject>Studies</subject><subject>Transaction costs</subject><subject>Volatility</subject><subject>Volume</subject><issn>0378-4266</issn><issn>1872-6372</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2010</creationdate><recordtype>article</recordtype><sourceid>X2L</sourceid><recordid>eNqFkE9v1DAQxS0EEkvhK6CIA7ek4z9rJzdQRaHVSlzgbE3sSeuwmyx2dlG_fWe1LQcuWBrb8rz3NP4J8V5CI0Hay7EZe5x-DWlqFEDXgGtAdi_ESrZO1VY79VKsQLu2Nsra1-JNKSPwaqVeCXkzDXPeUaww92nJeEfVn7TcV2VP4bDFJR2pmuZUqOJmTNPdW_FqwG2hd0_nhfh5_eXH1bd68_3rzdXnTR3WSi11dABByyADInYoezJdGxz12liDsYvQdr1Twxr5MWAbjYlBup6ClYC01hfi4zl3n-ffByqL36USaLvFieZD8fwvAwosCz_8IxznQ554Ni8704FTVrLInkUhz6VkGvw-px3mBy_BnzD60T9j9CeMHpxnjGy8PRszMZG_LiIae9aiP3qN2vD2wKWA4zSm05Vrf-oBN6X298uOwz6dw4jBHRNlX0KiKVBMmcLi45z-N88jETOYFw</recordid><startdate>20100201</startdate><enddate>20100201</enddate><creator>Albert Wang, F.</creator><general>Elsevier B.V</general><general>Elsevier</general><general>Elsevier Sequoia S.A</general><scope>DKI</scope><scope>X2L</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20100201</creationdate><title>Informed arbitrage with speculative noise trading</title><author>Albert Wang, F.</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c522t-d700c31c1caaa9a1be498c7eb3464ad9d089b72f5ac7eca8d44dc17bec610ae53</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2010</creationdate><topic>Arbitrage</topic><topic>Asymmetric information</topic><topic>Discounts</topic><topic>Financial speculation</topic><topic>Heterogeneous prior beliefs</topic><topic>Information</topic><topic>Informed trading</topic><topic>Informed trading Noise trading Asymmetric information Heterogeneous prior beliefs Liquidity Volume Volatility Transaction costs</topic><topic>Investment policy</topic><topic>Liquidity</topic><topic>Noise</topic><topic>Noise trading</topic><topic>Securities trading volume</topic><topic>Speculators</topic><topic>Studies</topic><topic>Transaction costs</topic><topic>Volatility</topic><topic>Volume</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Albert Wang, F.</creatorcontrib><collection>RePEc IDEAS</collection><collection>RePEc</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Journal of banking & finance</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Albert Wang, F.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Informed arbitrage with speculative noise trading</atitle><jtitle>Journal of banking & finance</jtitle><date>2010-02-01</date><risdate>2010</risdate><volume>34</volume><issue>2</issue><spage>304</spage><epage>313</epage><pages>304-313</pages><issn>0378-4266</issn><eissn>1872-6372</eissn><coden>JBFIDO</coden><abstract>We consider speculative noise trading when some naïve speculators trade on noise as if it were information [Black, F., 1986. Noise. Journal of Finance 41, 529–543]. We examine the optimal trading strategy of an informed investor who faces such naïve speculators in the market. We find that the informed investor trades aggressively on her information and takes large, opposite positions against the naïve speculators. The trading volume is thereby drastically magnified. While such speculative noise trading enhances liquidity, it makes prices less efficient. The overall dynamic patterns that emerge from our model are most consistent with the evidence for interday variations in volume, volatility, and transaction costs.</abstract><cop>Amsterdam</cop><pub>Elsevier B.V</pub><doi>10.1016/j.jbankfin.2009.07.019</doi><tpages>10</tpages></addata></record> |
| fulltext | fulltext |
| identifier | ISSN: 0378-4266 |
| ispartof | Journal of banking & finance, 2010-02, Vol.34 (2), p.304-313 |
| issn | 0378-4266 1872-6372 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_37240206 |
| source | RePEc; ScienceDirect Journals (5 years ago - present) |
| subjects | Arbitrage Asymmetric information Discounts Financial speculation Heterogeneous prior beliefs Information Informed trading Informed trading Noise trading Asymmetric information Heterogeneous prior beliefs Liquidity Volume Volatility Transaction costs Investment policy Liquidity Noise Noise trading Securities trading volume Speculators Studies Transaction costs Volatility Volume |
| title | Informed arbitrage with speculative noise trading |
| url | https://sfx.bib-bvb.de/sfx_tum?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&ctx_tim=2025-01-19T18%3A27%3A17IST&url_ver=Z39.88-2004&url_ctx_fmt=infofi/fmt:kev:mtx:ctx&rfr_id=info:sid/primo.exlibrisgroup.com:primo3-Article-proquest_cross&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=Informed%20arbitrage%20with%20speculative%20noise%20trading&rft.jtitle=Journal%20of%20banking%20&%20finance&rft.au=Albert%20Wang,%20F.&rft.date=2010-02-01&rft.volume=34&rft.issue=2&rft.spage=304&rft.epage=313&rft.pages=304-313&rft.issn=0378-4266&rft.eissn=1872-6372&rft.coden=JBFIDO&rft_id=info:doi/10.1016/j.jbankfin.2009.07.019&rft_dat=%3Cproquest_cross%3E1901708691%3C/proquest_cross%3E%3Curl%3E%3C/url%3E&disable_directlink=true&sfx.directlink=off&sfx.report_link=0&rft_id=info:oai/&rft_pqid=194907261&rft_id=info:pmid/&rft_els_id=S0378426609001794&rfr_iscdi=true |