Noise Traders and Herding Behavior

September 1, 1996

Preview Citation

Format: Chicago

Lee Scott Redding. Noise Traders and Herding Behavior, (USA: International Monetary Fund, 1996) accessed December 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Recent developments in financial economics have included many explorations into market microstructure, that is, the internal functioning of markets and the ways in which they provide liquidity to traders. An important contribution of this literature is that prices can deviate from their fundamental values. This paper describes models of imperfect liquidity and improperly processed information in financial markets, focusing on the noise trader and investor herding literature. The motivations for this line of research are presented, followed by a description of some of the major contributions and tests of some of their empirical implications.

Subject: Asset and liability management, Asset prices, Asset valuation, Financial institutions, Liquidity, Prices, Securities, Stocks

Keywords: Asset prices, Asset valuation, Dealer bear, Liquidity, Noise trader, Perfect-liquidity asset pricing, Positive-feedback trader, Price change, Securities, Stocks, Trader, Traders activity, WP

Publication Details

Pages:

16
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1996/104
Stock No:

WPIEA1041996
ISBN:

9781451947960
ISSN:

1018-5941

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