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Noise (economic)

Noise (economic) Definition

Economic noise, or simply noise, describes a theory of pricing developed by Fischer Black. To Black, noise is the opposite of information. Sometimes it's hype, other times it's inaccurate ideas, other times it's inaccurate data; noise has many forms. Noise is everywhere in the economy and we can rarely tell the difference between it and information.

Noise has two broad implications.

  • It allows speculative trading to occur (see below).
  • It creates inefficiency.





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