TY  - JOUR
AU  - Brunnermeier,Markus K.
AU  - Pedersen,Lasse Heje
TI  - Predatory Trading
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10755
PY  - 2004
Y2  - September 2004
UR  - http://www.nber.org/papers/w10755
L1  - http://www.nber.org/papers/w10755.pdf
N1  - Author contact info:
Markus K. Brunnermeier
Princeton University
Department of Economics
Bendheim Center for Finance
Princeton, NJ 08540
Tel: 609/258-4050
Fax: 609/258-0771
E-Mail: markus@princeton.edu

Lasse H. Pedersen
NYU Stern Finance
44 West Fourth Street
Suite 9-190
New York, NY 10012
Tel: 212/998-0359
Fax: 212/995-4233
E-Mail: lpederse@stern.nyu.edu
AB  - This paper studies predatory trading: trading that induces and/or exploits other investors' need to reduce their positions. We show that if one trader needs to sell, others also sell and subsequently buy back the asset. This leads to price overshooting and a reduced liquidation value for the distressed trader. Hence, the market is illiquid when liquidity is most needed. Further, a trader profits from triggering another trader's crisis, and the crisis can spill over across traders and across markets.
ER  -