Is noise trader risk priced?

Richard W. Sias, Laura T. Starks, Seha M. Tiniç

Research output: Contribution to journalArticlepeer-review

34 Scopus citations


We examine the hypothesis that closed-end fund shareholders garner greater returns than holders of the underlying assets as compensation for bearing “noise trader risk.” We demonstrate that the returns on fund shares are more volatile and exhibit greater mean reversion than the returns on the underlying assets, consistent with the hypothesis that noise traders play a more active role in closed-end fund shares than do the underlying assets. Inconsistent with the De Long et al. (1990) noise trader model, however, we find that after accounting for fund expenses, fund shareholders do not earn returns greater than holders of the underlying assets. JEL classification: G12.

Original languageEnglish (US)
Pages (from-to)311-329
Number of pages19
JournalJournal of Financial Research
Issue number3
StatePublished - Sep 2001

ASJC Scopus subject areas

  • Accounting
  • Finance


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