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On Rational Noise Trading and Market Impact

In: Artificial Markets Modeling

Author

Listed:
  • Florian Hauser

    (Innsbruck University School of Management)

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”.

Suggested Citation

  • Florian Hauser, 2007. "On Rational Noise Trading and Market Impact," Lecture Notes in Economics and Mathematical Systems, in: Andrea Consiglio (ed.), Artificial Markets Modeling, chapter 10, pages 141-153, Springer.
  • Handle: RePEc:spr:lnechp:978-3-540-73135-1_10
    DOI: 10.1007/978-3-540-73135-1_10
    as

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