Noise Trading: An Ad-based Measure
45 Pages Posted: 2 Nov 2018 Last revised: 11 Mar 2019
Date Written: March 9, 2019
This paper proposes a novel measure of noise trading that aims to capture uninformed retail trading. The measure, an indicator of whether the firm placed advertisement(s) in the Wall Street Journal seven calendar days earlier, is motivated by evidence that retail trading spikes on ad days, that firms regularly place ads at weekly intervals, and that weekly ads frequently contain duplicate images. Instrumented retail trading is positively associated with informed trading and stock price efficiency, which suggests that informed investors anticipate increases in noise trading and trade accordingly.
Keywords: Advertisement, Noise Trading, Uninformed Trading, Informed Trading, Retail Trading, Institutional Trading, Stock Liquidity, Price Efficiency, Image Analysis
JEL Classification: G10, G12, G14, G23, M37
Suggested Citation: Suggested Citation