The behaviour of noise traders : empirical evidence on purchases of business magazines

According to the prospect theory financial investors tend to sell winners too early and ride losers too long. Therefore, demand for financial advise should be high in a bull market and low in a bear market. Thus, we test the hypothesis whether the demand for business magazines is somehow related to the performance of the stock market. It turns out that the sales of these magazines are positively correlated with the stock market index. Due to the fact that the information provided in business magazines seem to be already reflected in stock prices, trading on those kind of data will be just like trading on noise. In conclusion, we are able to isolate a major influence factor for the expectation formation process of noise traders.