Sobolev, Daphne;
Clunie, James;
(2022)
Predatory trading: ethics judgments, legality judgments and investment intentions.
Review of Behavioral Finance
, 15
(3)
275 -291.
10.1108/RBF-09-2021-0184.
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Abstract
Purpose: Predatory trading is a stock market trading technique in which certain market participants exploit information about other market participants' need to trade. Predatory trading often harms others. Hence, this paper examines the determinants and effects of financial practitioners' and lay people's judgments of predatory trading. Specifically, it investigates how the public availability and reliability of the exploited information affect their ethics and legality judgments and how the latter influence their behavioral intentions and regulation support. / Design/methodology/approach: The authors conducted two scenario judgment studies. In the first study, participants were financial practitioners, and in the second – lay people. / Findings: Practitioners often judge predatory trading to be ethical. Practitioners and lay people incorporate in their ethics and legality judgments the public availability of the exploited information but tend to discount the legal reliability criterion. Lay people justify their ethics judgments using harm, legal or profit maximization principles. Practitioners' intentions to engage in predatory trading and lay people's intentions to let predatory fund managers invest their money depend on their judgments, which influence their regulation support. / Originality/value: This paper is the first to explore people's judgments of predatory trading. It highlights that despite the harm that predatory trading involves, practitioners often judge it to be ethical. Although law tends to lag behind financial innovation, people base their judgments and hence also behavioral intentions on their interpretation of the regulation. Hence, it reveals a dark aspect of the relationship between ethics and legality judgments.
| Type: | Article |
|---|---|
| Title: | Predatory trading: ethics judgments, legality judgments and investment intentions |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1108/RBF-09-2021-0184 |
| Publisher version: | https://doi.org/10.1108/RBF-09-2021-0184 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Predatory trading, Ethics judgment, Legal judgment |
| UCL classification: | UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management UCL > Provost and Vice Provost Offices > UCL BEAMS UCL |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10153929 |
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