Trading volume and information distribution in a market-clearing framework
AbstractThis paper investigates the relations between aggregate trading volume and information on financial markets from a theoretical standpoint. Through numerical examples, it relates some statistics describing equilibrium price and volume--such as the variance of the price and its correlation with the true asset value, the volume mean, variance, skewness, and kurtosis--to the distribution of information across traders. The analysis is carried out in a static noisy rational expectations framework, with multiple informed traders, where both the precision and the correlation of the signals observed by the traders can be modified.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 1997-41.
Date of creation: 1997
Date of revision:
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