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Internet, noise trading and commodity prices

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Author Info

  • Massimo PERI

    ()

  • Daniela VANDONE

    ()

  • Lucia BALDI

    ()

Abstract

We study the effect of an increased noise trading caused by easier access to information on agricultural futures prices. The theoretical framework is the Mixture Distribution Hypothesis (MDH), that posits a joint dependence of return volatility and information. We use two different proxies for the observed component of information flows, which allows to separate the effect of supply and demand of information. We analyse the effect of information demand using the Internet Search Volume from Google Insight. Empirical results support the MDH and highlight that the search of information on internet by noise traders can amplify volatility.

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File URL: http://wp.demm.unimi.it/tl_files/wp/2012/DEMM-2012_007wp.pdf
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Bibliographic Info

Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2012-07.

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Date of creation: 01 Jun 2012
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Handle: RePEc:mil:wpdepa:2012-07

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Related research

Keywords: Noise trading; commodity futures prices; information; mixture distribution hypothesis; egarch;

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