Noisy market hypothesis

The noisy market hypothesis is an idea about how the stock market works. Imagine you are at a party and lots of people are talking all at once. It can be hard to hear what one person is saying because of all the noise. The same thing happens in the stock market. There is so much information and so many people buying and selling stocks that sometimes it is hard to understand what is really going on.

The noisy market hypothesis says that sometimes the price of a stock doesn't just reflect the true value of the company. Instead, it might be influenced by other factors, like rumors or emotions. This can cause the price of a stock to go up or down in unexpected ways.

For example, if a rumor starts that a certain company is going to release a new, amazing product, lots of people might start buying that company's stock because they think it will go up in value. This can cause the stock price to go up, even if there isn't actually any evidence that the product will be successful.

Overall, the noisy market hypothesis suggests that the stock market can be unpredictable and that there will always be some degree of uncertainty when it comes to buying and selling stocks.