Noise trader
Encyclopedia
A noise trader also known informally as idiot trader is described in the literature of financial research as a stock trader
whose decisions to buy, sell, or hold are irrational and erratic. The presence of noise traders in financial markets can then cause prices and risk levels to diverge from expected levels even if all other traders are rational.
In finance, noise obtained a formal definition in a 1986 paper by Fischer Black
: "Noise in the sense of a large number of small events is often a cause factor much more powerful than a small number of large events can be."
Stock trader
A stock trader or a stock investor is an individual or firm who buys and sells stocks in the financial markets. Many stock traders will trade bonds as well...
whose decisions to buy, sell, or hold are irrational and erratic. The presence of noise traders in financial markets can then cause prices and risk levels to diverge from expected levels even if all other traders are rational.
In finance, noise obtained a formal definition in a 1986 paper by Fischer Black
Fischer Black
Fischer Sheffey Black was an American economist, best known as one of the authors of the famous Black–Scholes equation.-Background:...
: "Noise in the sense of a large number of small events is often a cause factor much more powerful than a small number of large events can be."