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Buy and Hold vs. Trade

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Two investors are considering buying shares in a given company. One investor is a "buy-and-hold" type of individual and the other likes to trade stocks about every two years, on average. Since the buy-and-hold investor will realize greater cash flow from the investment, does it follow that he should be willing to pay a higher price for it?

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Solution Preview

Two investors are considering buying shares in a given company. One investor is a "buy-and-hold" type of individual and the other likes to trade stocks about every two years, on average. Since the buy-and-hold investor will realize greater cash flow from the investment, does it follow that he should be willing to pay a ...

Solution Summary

Discusses whether the value of a share is different for different investors and examines whether the the buy-and-hold investor, because he will realize greater cash flow from the investment, should be willing to pay a higher price for a share.

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