Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 20, 2022 erstellt
Description:
In this paper, we investigate the level and determinants of predatory trading in an experimental asset market. Participants receive perfect signals about future order flow that can be exploited to generate additional profits in a dynamic trading problem. We vary the characteristics of the order flow signal by varying its direction, concentration and noise trading level, and we quantify their impact on predatory trading. Although there is relatively large predatory trading activity in very simple treatments, we find that predatory trading drops significantly in more difficult set-ups featuring noise trading, lower concentration of anticipated future orders and competition. Our findings suggest that strategic traders can be limited as to how much they can employ successful front-running strategies given the inherent complexity in financial markets