The Survival of Noise Traders in Financial Markets

J Bradford De Long, Andrei Shleifer, Lawrence Summers and Robert Waldmann ()
Authors registered in the RePEc Author Service: James Bradford DeLong ()

The Journal of Business, 1991, vol. 64, issue 1, 1-19

Abstract: The authors present a model of portfolio allocation by noise traders with incorrect expectations about return variances. For such misperceptions, noise traders who do not affect prices can earn higher expected returns than rational investors with similar risk aversion. Moreover, such noise traders can come to dominate the market in that the probability that they eventually have a high share of total wealth is close to one. Noise traders come to dominate despite their taking of excessive risk and their higher consumption. The authors conclude that the case against their long-run viability is not as clear-cut as is commonly supposed. Coauthors are Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann. Copyright 1991 by University of Chicago Press.

Date: 1991
References: Add references at CitEc
Citations: View citations in EconPapers (281)

Downloads: (external link)
http://dx.doi.org/10.1086/296523 full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
Working Paper: The Survival of Noise Traders in Financial Markets (1991)
Working Paper: The Survival of Noise Traders in Financial Markets (1988)
Working Paper: The Survival of Noise Traders in Financial Markets
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:64:y:1991:i:1:p:1-19

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().