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Summary: investors who focus too much on short-term results are bad for the long-term success of the companies they buy and sell. High-frequency traders are so
by dsjoerg 12y ago
Summary: investors who focus too much on short-term results are bad for the long-term success of the companies they buy and sell.
High-frequency traders are somewhat similar, in that they don't care enough about the long-term health of the companies they buy and sell. Therefore they are bad.
- bunderbunder 12y agoI'll agree with the first premise. But I don't think the 2nd bit follows. The reason speculation based on short-term results is problematic is that it creates perverse incentive structures that discourage a company's management from thinking too much about the long-term success of the company. But that's only possible because speculators are able to create market demands that punish and reward specific kinds of behavior. But HFT doesn't really create demand; it only responds to it. So the analogy fits in every spot except the only one that matters for the sake of the argument.