Noise Trading and Asset Pricing Factors

• 成果类型: Article
• 署名作者: Huang, Shiyang; Song, Yang; Xiang, Hong
• 署名单位: University of Hong Kong; University of Washington; University of Washington Seattle; Hong Kong Polytechnic University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.01827
• 发表日期: 2025
• 关键词: noise trader risk; factor premia; Anomaly

摘要

We demonstrate that a broad set of asset pricing factors/anomalies are significantly exposed to noise trader risk, and the noise trader risk is priced in factor premia. We first confirm that mutual funds' flow-induced trading of factors are uninformed, as they generate a large price impact on factor returns, followed by a complete reversal. We then show that asset pricing factors are subject to flow-driven noise trader risk in that expected variation (covariation) of flow-induced noise trading strongly forecasts variance (covariance) of factor returns. Importantly, factor premia are higher when flow-driven noise trader risk is expected to be more salient.