Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 26, 2019 erstellt
Description:
Previous studies regard short-term reversal as compensation for liquidity risk. In this paper, we document that the reversal pattern depends on the prior realized profits that affect the risk attitude of the liquidity supplier. In the gain domain, a realized gain reduces the pain from a potential loss, making the liquidity supplier more risk-seeking. In the loss domain, a small realized loss motivates the break-even effect, but a substantial loss is too difficult to cover. Hence, there is an approximately U-shaped relation between the risk aversion of the liquidity supplier and realized loss. The empirical results confirm the asymmetric impacts of realized gain and loss on short-term reversal