Information and Noise in Financial Markets: Evidence from the E-Mini Index Futures

37 Pages Posted: 22 Jan 2008 Last revised: 26 Mar 2008

See all articles by Alexander Kurov

Alexander Kurov

West Virginia University - College of Business & Economics

Date Written: February 2008

Abstract

We examine the informational contributions and effects on transitory volatility of trades initiated by different types of traders in three actively traded index futures markets. The results show that trades initiated by exchange member firms account for over 60% of price discovery during the trading day. These institutional trades appear to be more informative than trades of individual exchange members or off-exchange traders. We also find that off-exchange traders introduce more noise into the prices than do exchange members. Our results provide new evidence on the roles of different types of traders in the price formation process.

Keywords: market microstructure, futures markets, price discovery, transitory volatility

JEL Classification: G10, G14

Suggested Citation

Kurov, Alexander, Information and Noise in Financial Markets: Evidence from the E-Mini Index Futures (February 2008). Available at SSRN: https://ssrn.com/abstract=1086021 or http://dx.doi.org/10.2139/ssrn.1086021

Alexander Kurov (Contact Author)

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

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