Contrary to the assertion that the NYT presented to readers in reference to flash trading on stock, more trading does not necessarily increase a market's efficiency (defined in terms of getting the price right). There is a body of research on "noise trading," that shows that increased trading can be associated with movements away from fundamentals, if traders are acting based on rumors and gossip. (Larry Summers was one of the leaders in this literature.) Insofar as noise traders are dominating financial markets, less trading might be associated with an increase in efficiency.
If you enjoyed this article, please consider making a tax-deductible donation today. For over 30 years, The American Prospect has delivered independent reporting that exposes corporate power, investigates political corruption, and analyzes threats to our democracy. Unlike many media outlets, we’re not owned by billionaires or corporations—we’re powered by readers like you.
Today’s independent journalism faces unprecedented challenges. Your support makes our reporting possible and keeps our work free and accessible to all. Whether it’s $5 or $50, every contribution helps sustain our nonprofit newsroom.
Join our community of supporters and make a donation today to help keep independent journalism thriving.
Copyright 2025 | The American Prospect, Inc. | All Rights Reserved
