Listening to the noise: On price efficiency with dynamic trading

Lutz G. Arnold and David Russ

International Review of Economics & Finance, 2024, vol. 93, issue PB, 103-120

Abstract: This paper shows that, in the canonical dynamic rational expectations equilibrium model, public information about future noise trading is potentially detrimental to contemporaneous price efficiency. Our result supports concerns that social sentiment investing, sparked by growing availability of big data and advances in the way of processing it, exacerbates, rather than ameliorates, the negative impact of noise trading on price efficiency.

Keywords: Social sentiment investing; Price efficiency; Noise trading; Information aggregation (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:93:y:2024:i:pb:p:103-120

DOI: 10.1016/j.iref.2024.04.024

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