Which of the following characterize noise traders?
I.They do not care about intrinsic value.
II.They are always in the minority.
III.They can move price outside the bounds of intrinsic value.
IV.They trade on small events.

Question

Quizplus · Accepted Answer

I is true for noise traders, as they do not care about the intrinsic value of a security and trade on rumors or other non-fundamental factors. However, II is not necessarily true, as noise traders can sometimes dominate the market and move prices. III is true, as noise traders can cause prices to deviate from intrinsic value due to their irrational trading behavior. IV is also true, as noise traders may trade on small events that have little significance for fundamental investors. Therefore, options A and D are incorrect as they do not include III, and option C is incorrect as it does not include I.

Which of the Following Characterize Noise Traders