Keywords: Trading volume, information
Abstract: 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.
Full paper (697 KB PDF)
| Full paper (2184 KB Postscript)
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Last update: January 27, 1998