Question

In: Finance

what are non marginal investors? How can i distinguish between a non marginal investor and a...

what are non marginal investors? How can i distinguish between a non marginal investor and a marginal investor among shareholders?

Solutions

Expert Solution

Non marginal investors are investors who generally do not trade on the margin. They are not the investors who determine stock price.

Non marginal investors are those investors who generally trade in non margin securities and those securities are funded by their own capital and they are not taken on margin. These investor generally do not trade in securities on margin because they are generally highly volatile and highly risky. These are risk averse investors.

A non marginal investor only commits capital for while expecting to earn a rate of return and do not trade in securities which are tradable on margin.

While marginal investors control share price by owning a large chunk of a particular stock and also trading in the securities because he is a representative investor would actions reflect the belief of those people who are currently trading in stock. He is responsible for determining the stock price.


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