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> In this example, you'd be sending the "correct market signal" if you sold your shares as soon as it appreciated to $20. Anything more, and you're moving the m
by jMyles 6y ago
> In this example, you'd be sending the "correct market signal" if you sold your shares as soon as it appreciated to $20. Anything more, and you're moving the market away from its efficient price.
Is that true? Isn't anything above that price a 'reward' for being correct? And isn't that part of the signal according to a perfect information paradigm?
- fairity 6y agoWell, it's definitely a reward. But as I mentioned in my last reply, it's rewarding the wrong behavior if our goal is efficient price discovery.
- jMyles 6y agoI don't see how; it creates a disincentive to take short positions which are too low (good for price discovery) and provides a reward for discovering and outing them (good for price discovery).