In program trading, computers decide when to buy or sell stocks on behalf of large, institutional investors. The computers then carry out those transactions with electronic speed. Critics claim that this practice is a major reason why stock prices rose and fell sharply in the 1980s. Is this idea plausible? Why or why not?
In program trading, computers decide when to buy or sell stocks on behalf of large, institutional investors. The computers then carry out those transactions with electronic speed. Critics claim that this practice is a major reason why stock prices rose and fell sharply in the 1980s. Is this idea plausible? Why or why not?
Chapter31: Capital Markets
Section: Chapter Questions
Problem 8E
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In program trading, computers decide when to buy or sell stocks on behalf of large, institutional investors. The computers then carry out those transactions with electronic speed. Critics claim that this practice is a major reason why stock prices rose and fell sharply in the 1980s. Is this idea plausible? Why or why not?
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The comparable speed of the trading program can influence the demand and price of the stock.
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