NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Investment Noise and Trends

Robert F. Stambaugh

NBER Working Paper No. 20072
Issued in April 2014
NBER Program(s):   AP

During the past few decades, the fraction of the equity market owned directly by individuals declined significantly. The same period witnessed investment trends that include the growth of indexing as well as shifts by active managers toward lower fees and more index-like investing. I develop an equilibrium model linking these investment trends to the decline in individual ownership, interpreting the latter as a reduction in noise trading. Active management corrects most noise-trader induced mispricing, and the fraction left uncorrected shrinks as noise traders' stake in the market declines. Less mispricing then dictates a smaller footprint for active management.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20072

Users who downloaded this paper also downloaded these:
Ben-David, Franzoni, and Moussawi w20071 Do ETFs Increase Volatility?
Guvenen, Karahan, Ozkan, and Song w20913 What Do Data on Millions of U.S. Workers Reveal about Life-Cycle Earnings Risk?
Pastor, Stambaugh, and Taylor w19891 Scale and Skill in Active Management
Barth, Bryson, Davis, and Freeman w20447 It's Where You Work: Increases in Earnings Dispersion across Establishments and Individuals in the U.S.
Herskovic, Kelly, Lustig, and Van Nieuwerburgh w20076 The Common Factor in Idiosyncratic Volatility: Quantitative Asset Pricing Implications
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us