The group of investors who trade because of a surplus or need for cash are called:

A) marginal traders
B) liquidity traders
C) speculative traders
D) noise traders

Question

The group of investors who trade because of a surplus or need for cash are called:

A) marginal traders
B) liquidity traders
C) speculative traders
D) noise traders

Quizplus · Accepted Answer

One group of uninformed traders have been termed liquidity traders,who trade because of a surplus or need for cash.These investors may receive an inflow of funds and decide to invest in shares because shares look like a good investment.Alternatively,these investors may face a shortage of cash,require immediate liquidity,and hence sell shares.They do not trade in shares because of a belief that individual shares are mispriced;rather they trade on the basis of liquidity needs.

The Group of Investors Who Trade Because of a Surplus