Aurora Borealis
1 September 2011 Financial Analysts Journal Volume 67, Issue 5

To Trade or Not to Trade? Informed Trading with Short-Term Signals for Long-Term Investors

  1. Roni Israelov
  2. Michael Katz

When long-term investors trade slowly changing portfolios, they are not particularly sensitive to when they should place or modify their bets. Short-term information can be used to guide investors on how to time their trades. Strategic trade modification provides exposure to short-term signals without imposing additional transaction costs or capacity limits. Long-term investors should not ignore short-term information simply because it is too expensive to trade on.

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