| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 5084265 | International Review of Economics & Finance | 2008 | 11 Pages |
Abstract
In this paper, we study a model incorporating the retail trader's reluctance to sell into losses. We show that in this setup the informed trader always buys the asset when he receives a favorable signal. However, when the informed trader receives an unfavorable signal, he may not always sell the asset if the signal is moderately bad and the retail trader is reluctant to realize losses. Hence the good news travels faster than the bad news and the asset price exhibits steady climbs with sharp and sudden drops.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Jouahn Nam, Jun Wang, Ge Zhang,