Although focused on long-term value, North Circle Advisors will exploit temporary mispricings to open positions. For example, portfolio manager Bill Bradley pegged LIM Corporation’s fair value per share at $28 yesterday; however, LIM’s stock price seems to have overreacted to a competitor announcement prior to market open today. The follow events unfold over the course of the morning:
- PRIOR CLOSE: LIM closed at $30.05
- PRE-MARKET: LIM priced at $20.34
- MARKET OPEN: LIM opens at $22.15
- 10:00 AM: LIM trading at $23.01
- 10:00 AM: Bradley confirms the overreaction with target price of $28
- 10:05 AM: Bradley instructs trader to buy 25,000 shares, with a limit price of $28 when LIM is trading at $23.09
- 10:22 AM: Trader finishes the buy with an average purchase price of $23.45
Bradley and the trader conduct a post-trade evaluation. In picking an appropriate reference price, the trader asks Bradley if that would be a pre-trade, intraday, post-trade, or price target benchmark.
我的答案：Pre-trade price benchmark is appropriate for LIM trade.
As they try to exploit temporary mispricings, and found out the LIM is overreacted to a competitor announcement. Pre-trade benchmark is suitable for this circumstance and evaluate trading performance.
1）我这样写可以吗？这道题的答题要点是什么？需要写出为了捕捉mispricing的交易紧急性所以要选择pre-market吗？
标准答案太长了，不太清楚要怎么写才能答到要点。我理解下面这段才是重要的，第一段应该不用写？
For Bradley and his trader, two of these pre-trade benchmarks are potentially appropriate. Those are either the decision price, which was the price when Bradley made the decision to buy or sell the security, or the arrival price, which is the price of the security at the time the order is entered into the market for execution. Portfolio managers who are buying or selling on the basis of alpha expectations or a current market mispricing will often specify an arrival price benchmark.
2）然后我想知道对照上面提供的信息，请老师帮我确认一下，参考答案说的合适的两个benchmark是否是Decision Price ($28，起心动念的价格？) and Arrival Price ($23.09)，这两个价格对吗？其他那些pre-makert, market open都是干扰项？
- 10:00 AM: Bradley confirms the overreaction with target price of $28
- 10:05 AM: Bradley instructs trader to buy 25,000 shares, with a limit price of $28 when LIM is trading at $23.09
