Footnotes 1 . For early discussions of how noise traders might affect stock prices, see Fischer Black , “ Noise ,” Journal of Finance , 41 ( July 1986 ), pp. 529 – 543 . See also Robert Shiller , “ Stock Prices and Social Dynamics ,” Brookings Papers on Economic Activity , 1984 : 2 , pp. 457 – 498 . 2 . This presumes that investor sentiment induces “systematic” volatility (i.e. volatility shared by many different securities), or that investors demand higher returns even for bearing unsystematic risk. 3 . For a detailed treatment of these issues, see Kenneth Froot and Andre Perold, “New Trading Practices and Short‐Run Market Efficiency,” NBER Working Paper no. 3498, November 1990. 4 . Since 15‐minute data are not available prior to 1983, it is interesting to note that sluggishness, as measured by the autocorrelation of daily returns, declines steadily from the early 1970s until 1986, when it also reaches approximately zero. This decline coincides closely with the surge in growth of stock market turnover that occurred over this period. 5 . Although this sample period includes the world‐wide stock market crash of October 1987, the results are representative of those
Journal of Applied Corporate Finance – Wiley
Published: Jun 1, 1992
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