Economics, Econometrics and Finance
4 years ago

Stock market volatility driven by irrational noise traders impacts asset prices

National Bureau of Economic Research
The Economic Consequences of Noise Traders
J. Bradford De Long, Andrei Shleifer, Lawrence H. Summers, Robert Waldmann

Paper Summary

Financial markets can be influenced by noise traders who make decisions based on incorrect information, leading to higher volatility in stock prices. These noise traders can earn higher returns than rational investors because they take on more risk. This can result in asset prices deviating from their true values, impacting market performance.

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