The Survival Of Noise Traders In Financial Markets
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Author | : J. Bradford De Long |
Publisher | : |
Total Pages | : 44 |
Release | : 1988 |
Genre | : Capitalists and financiers |
ISBN | : |
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We use the revised estimates of U.S. GNP constructed by Christina Romer (1989) to assess the time-series properties of U.S. output per capita over the past century. We reject at conventional significance levels the null that output is a random walk in favor of the alternative that output is a stationary autoregressive process about a linear deterministic trend. The difference between the lack of persistence of output shocks either before WWII or over the entire century, on the one hand, and the strong signs of persistence of output shocks found by Campbell and Mankiw (1987) and by Nelson and Plosser (1982) for more recent periods is striking. It suggests to us a Keynesian interpretation of the large unit root in post-WWII U.S. output: perhaps post-WWII output shocks appear persistent because automatic stabilizers and other demand-management policies have substantially damped the transitory fluctuations that made up the pre-WWH Bums-Mitchell business cycle.
Author | : J. Bradfort de Long |
Publisher | : |
Total Pages | : 24 |
Release | : 1988 |
Genre | : |
ISBN | : |
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Author | : |
Publisher | : |
Total Pages | : |
Release | : 1988 |
Genre | : |
ISBN | : |
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Author | : Lee Scott Redding |
Publisher | : International Monetary Fund |
Total Pages | : 16 |
Release | : 1996-09-01 |
Genre | : Business & Economics |
ISBN | : 1451947968 |
Download Noise Traders and Herding Behavior Book in PDF, Epub and Kindle
Recent developments in financial economics have included many explorations into market microstructure, that is, the internal functioning of markets and the ways in which they provide liquidity to traders. An important contribution of this literature is that prices can deviate from their fundamental values. This paper describes models of imperfect liquidity and improperly processed information in financial markets, focusing on the noise trader and investor herding literature. The motivations for this line of research are presented, followed by a description of some of the major contributions and tests of some of their empirical implications.
Author | : Timothy E. Jares |
Publisher | : |
Total Pages | : 534 |
Release | : 1998 |
Genre | : |
ISBN | : |
Download The Survival and Consequences of Noise Traders in Financial Markets Book in PDF, Epub and Kindle
Author | : Stephan Brunner |
Publisher | : |
Total Pages | : 0 |
Release | : 2013 |
Genre | : |
ISBN | : |
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Author | : J. Bradford De Long |
Publisher | : |
Total Pages | : 44 |
Release | : 1987 |
Genre | : Capitalists and financiers |
ISBN | : |
Download The Economic Consequences of Noise Traders Book in PDF, Epub and Kindle
The claim that financial markets are efficient is backed by an implicit argument that misinformed "noise traders" can have little influence on asset prices in equilibrium. If noise traders' beliefs are sufficiently different from those of rational agents to significantly affect prices, then noise traders will buy high and sell low. They will then lose money relative to rational investors and eventually be eliminated from the market. We present a simple overlapping-generations model of the stock market in which noise traders with erroneous and stochastic beliefs (a) significantly affect prices and (b) earn higher returns than do rational investors. Noise traders earn high returns because they bear a large amount of the market risk which the presence of noise traders creates in the assets that they hold: their presence raises expected returns because sophisticated investors dislike bearing the risk that noise traders may be irrationally pessimistic and push asset prices down in the future. The model we present has many properties that correspond to the "Keynesian" view of financial markets. (i) Stock prices are more volatile than can be justified on the basis of news about underlying fundamentals. (ii) A rational investor concerned about the short run may be better off guessing the guesses of others than choosing an appropriate P portfolio. (iii) Asset prices diverge frequently but not permanently from average values, giving rise to patterns of mean reversion in stock and bond prices similar to those found directly by Fama and French (1987) for the stock market and to the failures of the expectations hypothesis of the term structure. (iv) Since investors in assets bear not only fundamental but also noise trader risk, the average prices of assets will be below fundamental values; one striking example of substantial divergence between market and fundamental values is the persistent discount on closed-end mutual funds, and a second example is Mehra and Prescott's (1986) finding that American equiti
Author | : |
Publisher | : |
Total Pages | : 24 |
Release | : 1991 |
Genre | : |
ISBN | : |
Download The Survival of Noise Traders in Fionancial Markets Book in PDF, Epub and Kindle
Author | : Omri Ross |
Publisher | : |
Total Pages | : |
Release | : 2013 |
Genre | : |
ISBN | : |
Download Essays on Noise Traders Risk in Financial Markets Book in PDF, Epub and Kindle
Author | : Alex Preda |
Publisher | : University of Chicago Press |
Total Pages | : 280 |
Release | : 2017-03-01 |
Genre | : Business & Economics |
ISBN | : 022642751X |
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We often think of finance as a glamorous world, a place where investment bankers amass huge profits in gleaming downtown skyscrapers. There’s another side to finance, though—the millions of amateurs who log on to their computers every day to make their own trades. The shocking truth, however, is that less than 2% of these amateur traders make a consistent profit. Why, then, do they do it? In Noise, Alex Preda explores the world of the people who trade even when by all measures they would be better off not trading. Based on firsthand observations, interviews with traders and brokers, and on international direct trading experience, Preda’s fascinating ethnography investigates how ordinary people take up financial trading, how they form communities of their own behind their computer screens, and how electronic finance encourages them to trade more and more frequently. Along the way, Preda finds the answer to the paradox of amateur trading—the traders aren’t so much seeking monetary rewards in the financial markets, rather the trading itself helps them to fulfill their own personal goals and aspirations.