Noise Trader Risk in Financial Markets

1990 ◽  
Vol 98 (4) ◽  
pp. 703-738 ◽  
Author(s):  
J. Bradford De Long ◽  
Andrei Shleifer ◽  
Lawrence H. Summers ◽  
Robert J. Waldmann
Keyword(s):  
Financial Markets ◽  
Noise Trader

scholarly journals The Noise Trader Approach to Finance

1990 ◽  
Vol 4 (2) ◽  
pp. 19-33 ◽  
Author(s):  
Andrei Shleifer ◽  
Lawrence H Summers
Keyword(s):  
Financial Markets ◽  
Investor Sentiment ◽  
Efficient Markets ◽  
Risky Assets ◽  
Noise Trader ◽  
Security Returns

This paper reviews an alternative to the efficient markets approach that we and others have recently pursued. Our approach rests on two assumptions. First, some investors are not fully rational and their demand for risky assets is affected by their beliefs or sentiments that are not fully justified by fundamental news. Second, arbitrage—defined as trading by fully rational investors not subject to such sentiment—is risky and therefore limited. The two assumptions together imply that changes in investor sentiment are not fully countered by arbitrageurs and so affect security returns. We argue that this approach to financial markets is in many ways superior to the efficient markets paradigm.

European Financial Markets and Institutions

2009 ◽  
Author(s):  
Jakob de Haan ◽  
Sander Oosterloo ◽  
Dirk Schoenmaker
Keyword(s):  
Financial Markets ◽  
Markets And Institutions

Discrete Models of Financial Markets

2009 ◽  
Author(s):  
Marek Capinski ◽  
Ekkehard Kopp
Keyword(s):  
Financial Markets ◽  
Discrete Models

Financial Markets and Institutions

2012 ◽  
Author(s):  
Jakob de Haan ◽  
Sander Oosterloo ◽  
Dirk Schoenmaker
Keyword(s):  
Financial Markets ◽  
Markets And Institutions

Limit theorems and price changes in financial markets

1998 ◽  
Vol 77 (5) ◽  
pp. 1353-1356
Author(s):  
Rosario N. Mantegna, H. Eugene Stanley
Keyword(s):  
Financial Markets ◽  
Limit Theorems ◽  
Price Changes
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