The remaining fraction (1 y q ) would rationally choose to act as nondiscretionary traders because they face higher monitoring costs than that of the q percentile liquidity trader. (A6) All liquidity traders realize their trading requirements at time t ¼ 0y: Discretionary liquidity traders can trade in any one of the m periods.
(1998) Classification of Commodity Trading Advisors Using Maximum Likelihood Factor Analysis.
Review of Financial Studies 3, 593-624. Foster, F.