Investor's trading frequency and market quality

Based on the method of Bayesian-updating, this study constructs a rational expectation equilibrium model, and explores the influence of trading frequency on market quality. Meanwhile, this study introduces follower and analyzes the strategic interaction between informed trader and follower. Our study draws conclusions that follower always adopts the same trading strategy as informed trader, and the numerical simulation shows that higher trading frequency reduces the trading intensity of informed trader and follower, and increases the expected returns of both types of investors. In addition, while increasing the informativeness of market prices, higher trading frequency will reduce market liquidity and even lead to liquidity collapse.