SEC forum presents Kasetsart University's research on 'noise trading'

A noise trader is an investor who makes decisions on the buying and selling of stocks without the use of fundamental data.
Chalee Chantanayingyong, acting SEC secretary-general, said the research papers presented at the forum pointed out the significance of prudently studying information and making fundamental analysis of securities before making investment decisions in order to mitigate trading risks.
Assistant Professor Dr Thanachot Boonworachot, a researcher at the faculty of agro-industry, Kasetsart University, said the paper on “Returns, Investor Trading Volumes and Price Volatility Relationships on the Stock Exchange of Thailand” analysed the probability of noise-trading risks in the trading of securities on the SET. The findings suggested that non-fundamental factors highly influenced the SET Index – trading volumes, for instance. Meanwhile, the market indices have been influenced by the fundamental factors in the United States.
“Noise Trading Behaviour Analysis in the SET” was presented as the second research paper. Although the 2010 study concluded that the behaviour of retail investors tended to be regarded as noise trading, this paper brought about a new conclusion that all types of investors in the SET were informed traders.
In terms of investment returns, however, the highest went to foreign investors and the lowest to retail investors. This was caused by the limitation in methods of submission of trading orders. Institutional investors submitted trading orders at market prices (market order) while retail investors submitted orders with specific prices (limited order), with greater exposure to share-price fluctuation.