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Research Details
On the effects of restricting short-term investment, Review of Financial Studies
Abstract
We study the effects of policies proposed for addressing "short-termism" in financial markets. We examine a noisy rational expectations model in which investors' exposures and information about fundamentals endogenously vary across horizons. In this environment, taxing or outlawing short-term investment has no negative effect on the information in prices about long-term fundamentals. However, such a policy reduces the profits and utility of short- and long-term investors. Changing policies on the release of short-term information can help long-term investors -- an objective of some policymakers -- at the expense of short-term investors, but it also makes prices less informative and increases costs of speculation.
Type
Article
Author(s)
Nicolas Crouzet, Ian Dew-Becker, Charles Nathanson
Date Published
2020
Citations
Crouzet, Nicolas, Ian Dew-Becker, and Charles Nathanson. 2020. On the effects of restricting short-term investment. Review of Financial Studies. 33(1): 1-43.
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