On Rational Noise Trading and Market Impact

Florian Hauser ()
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Florian Hauser: Innsbruck University School of Management

Chapter 10 in Artificial Markets Modeling, 2007, pp 141-153 from Springer

Abstract: Abstract Since Black (1986) introduced noise as “expectations that need not follow rational rules”, noise traders are welcome in modelling financial markets as they provide liquidity and solve theoretical problems like the information-paradox formulated by Grossman and Stiglitz (1980). Unfortunately, those traders cannot expect to be honored for their contributions, or, as Black (1986) states, “if they expect to make profits from noise trading, they are incorrect”.

Keywords: Strategy Allocation; Average Return; Reservation Price; Information Level; Random Strategy (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1007/978-3-540-73135-1_10

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