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Antinoise in U.S. equity markets

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  • Enoch Cheng
  • Clemens C. Struck

Abstract

There are many well documented behavioral biases in financial markets. Yet, analyzing U.S. equities reveals that less than 1% of returns are predictable in recent years. Given the high number of biases, why are returns not more predictable? We provide new evidence in support of one possible explanation. In the long-run, low correlations across signals that trigger biases may create sufficient antinoise which mutes more sizable patterns in returns. However, in the short-run, correlation spikes coincide with market volatility indicating that behavioral biases may become more visible during crises.

Suggested Citation

  • Enoch Cheng & Clemens C. Struck, 2021. "Antinoise in U.S. equity markets," Quantitative Finance, Taylor & Francis Journals, vol. 21(12), pages 2069-2087, December.
    • Handle: RePEc:taf:quantf:v:21:y:2021:i:12:p:2069-2087
    DOI: 10.1080/14697688.2021.1923789
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    Cited by:

    1. Smyth, William & Broby, Daniel, 2022. "An enhanced Gerber statistic for portfolio optimization," Finance Research Letters, Elsevier, vol. 49(C).

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