We study the impact of noise traders' limited attention on financial markets. We exploit episodes of sensational news (exogenous to the market) that distract noise traders. On “distraction days”, trading activity, liquidity, and volatility decrease, and prices reverse less among stocks owned...

We present an agent-based model (ABM) of a financial market with n 1 risky assets, whose price dynamics result from the interaction between rational fundamentalists and trend following imitative noise traders. The interactions and opinion formation of the noise traders are described by an...

Noise traders are agents whose theoretical existence has been hypothesized as a way of solving certain fundamental problems in Financial Economics. We briefly review the literature on noise traders. The is an entry for The New Palgrave: A Dictionary of Economics, 2nd Edition (Palgrave Macmillan:...