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.