Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5084983 | International Review of Financial Analysis | 2012 | 11 Pages |
Abstract
⺠We model the impact of sentimental-noise traders on price discovery. ⺠We find that bid-ask spreads narrow in the presence of noise traders. ⺠Sentimental noise slows down the speed of price reversion to the fundamental value. ⺠Spreads widen when sentiment aligns with the market maker's prior beliefs. ⺠Market maker's ability to accurately predict sentiment is a price-discovery factor.
Related Topics
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Economics and Econometrics
Authors
Gady Jacoby, Rose C. Liao,