Question: Consider two companies that are identical except for their shareholder base. One companys shareholders comprise mostly noise traders, with mechanical investors making up the remainder.

Consider two companies that are identical except for their shareholder base. One company’s shareholders comprise mostly noise traders, with mechanical investors making up the remainder. The other’s shareholders are mainly fundamental investors, with a few mechanical investors. Discuss the possible implications of these differences in ownership for the two companies’ expected levels of share price and share price volatility.

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