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Title:Big elephants in small ponds: do large traders make financial markets more aggressive? PDF Logo
Authors:Bannier, Christina E.
Issue Date:2004
Series/Report no.:Volkswirtschaftliche Diskussionsbeiträge 77
Abstract:Market participants often suspect that large traders have a disproportionate effect on financial markets, increasing the aggressiveness of market responses. Prior studies have shown that the impact of a large trader on a currency crisis depends positively on his size and informational position. By contrast, this article highlights the role that market sentiment has on the impact of a large trader. If the market believes that fundamentals are weak, then the probability of a crisis depends positively on the trader's size but negatively on the precision of his information, with these effects reversed in a generally optimistic market. A large player, therefore, need not make market responses more aggressive.
Subjects:currency crises
large traders
market sentiment
private and public information
Document Type:Working Paper
Appears in Collections:Volkswirtschaftliche Diskussionsbeiträge, Universität Kassel

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