A-Z Popular Blog Behavioral Finance Search »
Behavioral Finance
Related Guides
Behavioral Finance

What are Noise Traders?

 , updated on
Noise trader is a term for investors who buy and sell stock based on hype, biases, unconventional theories, misinformation and poor quality analysis. The term appears in economic research papers to explain the apparent lack of logic in the behavior of many market participants.
Noise trading represents a type of anti-information that makes it difficult to interpret price fluctuations. It can also represent an opportunity as noise traders may drive irrational prices in an otherwise efficient market.


A stock drops due to a popular post in social media that is factless banter.
A stock initially goes up after an extremely negative press release because investors read the title but not the content and assume it's good news.
A small cap stock rises because its ticker symbol is confused with a large cap stock.
Overview: Noise Traders
A stock trader who buys and sells based on biases, hype, misinformation and poor quality analysis to the extent that their trades are difficult to model with logic based on news about a company.
Noise traders raise risk levels as they are apt to act on rumor and hype.
Noise traders cause price inefficiencies that can be profitable for sophisticated entities that can recognize such situations.
Related Concepts
Next: Fear Of Missing Out
More about investing behavior:
Animal Spirits
Bull Trap
Dumb Money
Falling Knife
Greed Is Good
Home Bias
Long Squeeze
Mr Market
Noise Traders
Sell On News
If you enjoyed this page, please consider bookmarking Simplicable.

Behavioral Finance

A list of the core ideas of behavioral finance.

Herd Behavior

The definition of herd behavior with examples.

Class Consciousness

The definition of class consciousness with examples.

Expectancy Theory

The definition of expectancy theory with examples.

Greed Is Good

An overview of greed is good with examples.

Dumb Money

The definition of dumb money with examples.

Investing Strategy

A list of investing strategies in the real world.

Capitalism Examples

An overview of capitalism with examples.

Externality Example

An overview of externalities with examples.


A few articles about investing.

Financial Services

The definition of financial services with examples.

Economic Issues

A list of common economic issues.

Wealth Examples

An overview of wealth with examples.

Financial Literacy

An overview of financial literacy with examples.

Trees Don't Grow To The Sky

An overview of trees don't grow to the sky, a German proverb.

Personal Economy

An overview of personal economy with examples.
The most popular articles on Simplicable in the past day.

New Articles

Recent posts or updates on Simplicable.
Site Map