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What does NOISE TRADER mean? NOISE TRADER meaning - NOISE TRADER definition - NOISE TRADER explanation. What is the meaning of NOISE TRADER? What is the definition of NOISE TRADER? What does NOISE TRADER stand for? What is NOISE TRADER meaning? What is NOISE TRADER definition?
Source: Wikipedia.org article, adapted under
https://creativecommons.org/licenses/by-sa/3.0/ license.
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."