On the Effects of Restricting Short-Term Investment

Nicolas Crouzet, Ian Dew-Becker*, Charles G. Nathanson

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


We study the effects of policies proposed to address "short-termism" in financial markets. We examine a noisy rational expectations model in which investors' exposures and information about fundamentals endogenously vary across horizons. In this environment, taxing or outlawing short-term investment doesn't negatively affect the information in prices about long-term fundamentals. However, such a policy reduces short-and long-term investors' profits and utility. Changing policies about the release of short-term information can help long-term investors-an objective of some policy makers-at the expense of short-term investors. Doing so also makes prices less informative and increases costs of speculation. Received June 24, 2018; editorial decision February 19, 2019 by Editor Stijn Van Nieuwerburgh. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Original languageEnglish (US)
Pages (from-to)1-43
Number of pages43
JournalReview of Financial Studies
Issue number1
StatePublished - Jan 1 2020

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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