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A noise trader is described in the literature of financial research as a stock trader whose decisions to buy, sell, or hold are not based upon fundamental analysis. The presence of noise traders in financial markets can then cause prices and risk levels to diverge from expected levels even if all other traders are rational.[1]
In finance, noise obtained a formal definition in a 1986 paper by Fischer Black "Noise in the sense of a large number of small events is often a cause factor much more powerful than a small number of large events can be."[2]
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