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Indiana University Bloomington

Department of Finance

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Research and Publications

Journal Articles

Liquidity Provision and Noise Trading: Evidence from the 'Investment Dartboard' Column

1999, Journal of Finance

Scott Smart, Jason Greene


How does increased noise trading affect market liquidity and trading costs? We use The Wall Street Journal’s “Investment Dartboard” column, which stimulates noise trading, as a natural experiment to evaluate models of the bid-ask spread. We find that substantial increases in trading volume and significant but temporary abnormal returns occur when analysts recommend stocks in this column, especially when recommendations come from analysts with successful contest track records. We also find an increase in liquidity and a decrease in the adverse selection component of the bid-ask spread.


Smart, Scott B. and Jason Greene (1999), "Liquidity Provision and Noise Trading: Evidence from the 'Investment Dartboard' Column," Journal of Finance, Vol. 54, October, pp. 1885-1899.