Sys-ematic noise
# Speakers: 張博能 | Department of Money and Banking
Brad M. Barber, Terrance Odean, Ning Zhu
Course of Financial Economics @ National Chengchi University
[email protected] | @SCephan_Chang
2015/6/15
Discount Re+ail
Period
Number of householders
Number of accounts
Number of buys
Mean buy value
Number of sells
Mean sell value
Da+a & Method
1991/1 - 1996/11 1997/1 - 1999/6
66,465 665,533
104,211 793,499
1,082,107 3,974,998
$11,205 $15,209
887,594 3,219,299
$13,707 $21,170
Da+a & Method
Lakonishok, Shleifer and Vishny(1991)
HMit = |Pit � E(Pit)| � E|Pit � E[Pit]|
= |( Bit
Bit + Sit) � E(
Bit
Bit + Sit)| � AFit
where Pit : purchase proportion of all trade
E(Pit) =
�Bit�
Bit +�
Sit
Da+a & Method
Discount Broker Re+ail Broker
All S+ocks
Large
Medium
Small
0.0681 (< 0.001) ***
0.0758 (< 0.001) ***
0.0659 (< 0.001) ***
0.0637 (< 0.001) ***
0.1279 (< 0.001) ***
0.1138 (< 0.001) ***
0.1313 (< 0.001) ***
0.1250 (< 0.001) ***
Da+a & Method
Panel A: Large discount broker
Group 1
with Group 1
Group 2
with Group 2
Horizon (L) Correlation of % buys in month t with %
buys in month t+L
Group 1
with Group 2
0
1
2
.
.
.
12
24
100% 100% 73.4%
48.2% 46.7% 47.7%
34.1% 33.1% 33.7%
9.7% 8.8% 9.6%
5.1% 3.1% 4.6%
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Da+a & Method
Panel b: Large re+ail broker
Group 1
with Group 1
Group 2
with Group 2
Horizon (i) Correlation of % buys in month i with %
buys in month t+i
Group 1
with Group 2
0
1
2
.
.
.
12
24
100% 100% 75.1%
56.7% 58.6% 55.8%
45.8% 46.4% 45.5%
22.7% 20.8% 23.1%
16.6% 22.6% 17.4%
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Separa+ely analyse buying
and Selling, monthlyBit
Pit= ab
t +12�
j=1
bbjtRt�j + cbt
Bi,t�1
Pi,t�1+ �bit
Bit
Pit= as
t +12�
j=1
bsjtRt�j + cst
Bi,t�1
Pi,t�1+ �sit
These are not primarily driven by:
Summary
> Passive response +o trades of institutional inves+ors
> Tax loss selling
> Risk preference
Individual inves+ors, sometimes referred
+o as noise traders, have the po+ential
+o affect asset prices because their
noise is sys+ematic.
Conclusion