Low information voters and noise traders

The term “low information voter” has become ubiquitous in political discourse:

The term “low information” was first used by the political scientist Samuel Popkin in his 1991 book The Reasoning Voter: Communication and Persuasion in Presidential Campaigns. Popkin argued that certain sections of the American electorate use “low-information rationality” and take “information shortcuts” when deciding who to vote for. They look out for “low-information signals” as to which candidate they should support – that is, they ignore complex matters such as a candidate’s policy proposals or his ideological make-up, and instead “learn about [his] traits and characteristics”.

There seems to be a financial equivalent to this phenomenon, the low information investor:

Many financial advisors can likely relate to the saying, “We don’t have people with investment problems. We have investments with people problems.”
That’s because investors’ emotions and behavior often lead them to inferior performance—they tend to exit stocks and funds before gains (i.e., panicking and selling at the bottom of the market and missing the subsequent upswing) and enter before losses (i.e., investing at or near the peak).

Losing money through sheer ignorance is understandable. It is far worse being a noise trader that loses money because he thinks he knows something:

At the time, the quantitative trading strategies used at Goldman and elsewhere fell into two general categories.
There were technical trading strategies that looked to exploit trends or other patterns in price movements. And there were fundamental strategies that used company-level research to pick out underpriced stocks, or economy-level research to time fluctuations in the market as a whole. In an efficient market neither strategy should make money, and the evidence of academic studies convinced Fischer that markets were at least that efficient. It followed that anyone adopting either of these strategies was likely to be a noise trader, and so likely to be losing money systematically to any true information trader. One way Fischer could help traders was by preventing them from trading on noise. He began by confiscating books on technical trading that he found around the trading floor.
Mehrling, Perry. Fischer Black and the Revolutionary Idea of Finance. Wiley.

In other words, Goldman Sachs made money by being on the other side of the noise traders. They were information traders:

In a similar vein, Fischer made a habit of challenging any and all traders’ folk wisdom that did not comport with rational economic analysis. The only thing that should matter to a trader, he would always insist, is prospective total return given current market conditions. In general that means treating trades with negative carry (negative immediate cash flow) just the same as trades with positive carry, treating short positions the same as long positions, and treating illiquid markets the same as liquid markets. Traders should be just as prepared to hold a position with unrealized gains as a position with unrealized losses, and just as prepared to hold old positions as new ones. Of course it does no good to exhort traders to change their behavior if the performance measures that determine their compensation encourage something else. So Fischer began criticizing performance measures as well. The overarching idea was to reward traders for their skill, not their luck.
Mehrling, Perry. Fischer Black and the Revolutionary Idea of Finance. Wiley.

Here’s some food for thought: Make money, not predictions, and Technical Trading Rules Revisited.