easy · Market Microstructure
A fundamental analyst correctly predicts a company's earnings beat and buys shares at $20.00. A noise trader also buys shares at $20.00 just for fun. Both sell at $22.00.
Who provided the 'compensation' for the profits of the informed analyst?
- The company whose earnings improved.
- There is no 'loss' because the stock value increased.
- The noise trader and other uninformed participants.
- The exchange where the trade occurred.
Sign up free to see the explanation and track your rank →
More Market Microstructure practice
- A stock is quoted at $50.00 bid x $50.10 ask. A buyer submit… — How does this action affec
- A stock is trading at $100.00. The Level 1 S&P 500 Market-Wi… — What is the status of trad
- If the stock price drops instantly from $50.05 to $49.00 in a 'flash crash,' what happens
- Under the National Market System (Reg NMS), if Exchange A is quoting a stock at $10.00 x
- If the stock gaps down and opens at $69.50 on Tuesday morning, at what price will the trad
- If the dealer uses a quote shading parameter of κ = 0.00004 to manage inventory, what is t
- A trader places a large sell order for 50,000 shares at $50.01 only to cancel it immediate
- Using the Lee-Ready algorithm, how should a trade occurring at $50.10 following a $50.00 t