Title: Noise Trader Risk Definition
Headings: Noise Trader Risk
Noise Trader Risk
What Is Noise Trader Risk?
Understanding Noise Trader Risk
Example of Noise Trader Risk

Content: Behavioral finance researchers have attempted to isolate this risk in order to explain and capitalize upon the sentiment of the majority of investors. Noise trader risk is assumed to be more readily found in small-cap stocks, but has also been identified mid- and large-caps. Also, as the media pumps out more and more content, there tends to be more headline risks for stocks and markets. The noise can sometimes move stocks and markets in the near-term. However, it is important to understand that some noise is designed to stir emotions. Emotions are typically not a good indicator for investors. Understanding Noise Trader Risk
A noise trader is a general term used to describe traders or investors who make decisions regarding buy and sell trades in securities markets without the support of professional advice or advanced fundamental or technical analysis. Trading by noise traders tends to be impulsive and based on irrational exuberance, or emotions such as fear or greed. These investors typically follow trends, exhibit herding behavior, and overreact to both good and bad news. Noise trader risk describes the negative effect of such irrational or uninformed trading on otherwise sound investment analysis in a security.