Signal to Noise Ratio: Reducing Investment Noise | Spring 2024

The Signal-to-noise ratio (SNR) is a science and engineering measure referring to the ratio of desired signal to the level of undesired background noise. Often measured in decibels, it gauges sound intensity. You want a high SNR to be able to accurately hear important signals, to distinguish between meaningful signals and random fluctuations, and to be able to detect weak signals among noise. “Sounds” like something investors can use! You want to distinguish what is important to hear/know from what is unimportant, confusing, and throws you “off track” from making better investment decisions.