CFA Practice Question

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CFA Practice Question

The key difference between investors and information-motivated traders is ______.
A. their motives for trading
B. the risks they take
C. their expected holding periods
Explanation: Investor can take high or low risk positions, and their holding periods can be long or short. The characteristic that most distinguishes investors from information-motivated traders is the return they expect.

User Contributed Comments 6

User Comment
blink78597 motive for investing is to make money
jnptrsn1 Wouldnt an investor generally prefer a longer time frame, and an information motivated trader want to base their entering and exiting positions on specific events?
tjlbutler I concur with both of you guys
navarro I personally don't like this question. Is confusing.
ascruggs92 I got this wrong but thinking about it now makes sense.

The key difference is motive for trading. Investors seek to make money by holding a portfolio of diversified assets over time, information motivated traders seek to make money by predicting the market's reaction to new information. Holding period can be long or short for a trader, although it is typically short
awbronson "Motive" is a poor word choice here. They should ask, what is the "method of security selection" or something like that. Motive is about making money ultimately for both traders and investors.
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