HFT affect and take advantage of minor price swings[2], and their arbitrage is based on this. Long-term investments are the primary driver of (hence) long-term price movements. After all, HFT, by definition, have no long term interests in issues, so they are (usually) equally weighted in either (long or short) direction, thus cancelling their long-term effects out, even in a situation where there are no long-term investors.
1. This pertains your comment regarding HFT. Activist investors, which you also mentioned, are just long-term investors with a marketing strategy (put your money into something and then go tell everyone), and in some cases a lobbying strategy (e.g., Bill Ackman's notable short of HLF), and they have no place being compared with HFT.
2. It is true that, sometimes, minor price swings can cause a crossing of a tipping point (e.g., below a prior price support level, etc.), but even in these cases the long-term price will adjust for these swings based on intrinsic value.
I was more referring to the liquidity provided by HFTs -- they do tend to speed up price corrections, even if they're not the primary driver. I was referring more to the tipping point scenario -- HFT ensures that asset bubbles don't persist for long.
HFT affect and take advantage of minor price swings[2], and their arbitrage is based on this. Long-term investments are the primary driver of (hence) long-term price movements. After all, HFT, by definition, have no long term interests in issues, so they are (usually) equally weighted in either (long or short) direction, thus cancelling their long-term effects out, even in a situation where there are no long-term investors.
1. This pertains your comment regarding HFT. Activist investors, which you also mentioned, are just long-term investors with a marketing strategy (put your money into something and then go tell everyone), and in some cases a lobbying strategy (e.g., Bill Ackman's notable short of HLF), and they have no place being compared with HFT.
2. It is true that, sometimes, minor price swings can cause a crossing of a tipping point (e.g., below a prior price support level, etc.), but even in these cases the long-term price will adjust for these swings based on intrinsic value.