Is Sound Just Noise?
Article first published online: 17 DEC 2002
The American Finance Association 2001
The Journal of Finance
Volume 56, Issue 5, pages 1887–1910, October 2001
How to Cite
Coval, J. D. and Shumway, T. (2001), Is Sound Just Noise?. The Journal of Finance, 56: 1887–1910. doi: 10.1111/0022-1082.00393
- Issue published online: 17 DEC 2002
- Article first published online: 17 DEC 2002
- Cited By
We analyze the information content of the ambient noise level in the Chicago Board of Trade's 30-year Treasury Bond futures trading pit. Controlling for a variety of other variables, including lagged price changes, trading volumes, and news announcements, we find that the sound level conveys information which is highly economically and statistically significant. Specifically, changes in the sound level forecast changes in the cost of transacting. Following a rise in the sound level, prices become more volatile, depth declines, and information asymmetry increases. Our results offer important implications for the future of open outcry and floor-based trading mechanisms.