Liquidity provision and noise trading: Evidence from the "Investment Dartboard" column

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