Trading volume and information distribution in a market-clearing framework
This 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.
|Date of creation:||1997|
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- Dominique Dupont, 1997. "Extracting information from trading volume," Finance and Economics Discussion Series 1997-20, Board of Governors of the Federal Reserve System (U.S.).
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377R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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- Foster, F Douglas & Viswanathan, S, 1995. "Can Speculative Trading Explain the Volume-Volatility Relation?," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 379-96, October.
- Easley, David & Kiefer, Nicholas M & O'Hara, Maureen, 1996. " Cream-Skimming or Profit-Sharing? The Curious Role of Purchased Order Flow," Journal of Finance, American Finance Association, vol. 51(3), pages 811-33, July.
- Michael J. Fleming & Eli M. Remolona, 1996. "Price formation and liquidity in the U.S. treasuries market: evidence from intraday patterns around announcements," Research Paper 9633, Federal Reserve Bank of New York.
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