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Predatory Trading and Crowded Exits: New thinking on market volatility by James Clunie

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Chapter 6. Final Thoughts

In this book I have looked at a number of phenomena that lead security prices to move temporarily away from equilibrium. These situations present traders with opportunities to earn profits and can provide the lifeblood for many a trading desk.

For those who are caught unaware and forced to close their positions at unfavourable prices, these episodes can also prove costly.

Do these deviations in securities prices matter to traditional, long-only investors?

For an investor managing an unleveraged, closed-ended fund with a long-term horizon, perhaps they are of little import. However, the volatility associated with these phenomena can provide opportunities for building long-term positions at attractive cost bases. ...

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