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Identifying Noise Traders: The Head-And-Shoulders Pattern in U.S. Equities

74 Pages Posted: 20 Oct 2006  

Carol L. Osler

Brandeis University - International Business School

Date Written: July 1998

Abstract

This paper identifies a specific set of agents as noise traders in U.S. equity markets, and examines their effects on returns. These agents, who speculate using the "head-and-shoulders" chart pattern, are shown to qualify as noise traders because (1) trading volume is exceptionally high when they are active, and (2) their trading is unprofitable. Head-and-shoulders sales lower prices and vice versa, effects that disappear within two weeks.

JEL Classification: G12, G14

Suggested Citation

Osler, Carol L., Identifying Noise Traders: The Head-And-Shoulders Pattern in U.S. Equities (July 1998). FRB of New York Staff Report No. 42. Available at SSRN: https://ssrn.com/abstract=938807 or http://dx.doi.org/10.2139/ssrn.938807

Carol L. Osler (Contact Author)

Brandeis University - International Business School ( email )

Mailstop 32
Waltham, MA 02454-9110
United States
781-736-4826 (Phone)

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