I thank Lou Abarcar, Arabinda Basistha, Robert Daigler (the referee), Upinder Dhillon, Grigori Erenburg, Gerald Gay (the editor), Andrew Harvey, Dennis Lasser, Peter Locke, Stephen Satchell, and Robert Webb for helpful comments and suggestions. Special thanks to Alessio Sancetta for many helpful discussions. I am also grateful to the staff of the Commodity Futures Trading Commission for their help in obtaining the data. Any remaining errors are my own.
INFORMATION AND NOISE IN FINANCIAL MARKETS: EVIDENCE FROM THE E-MINI INDEX FUTURES
Article first published online: 5 SEP 2008
© 2008 The Southern Finance Association and the Southwestern Finance Association
Journal of Financial Research
Volume 31, Issue 3, pages 247–270, Fall 2008
How to Cite
Kurov, A. (2008), INFORMATION AND NOISE IN FINANCIAL MARKETS: EVIDENCE FROM THE E-MINI INDEX FUTURES. Journal of Financial Research, 31: 247–270. doi: 10.1111/j.1475-6803.2008.00239.x
- Issue published online: 5 SEP 2008
- Article first published online: 5 SEP 2008
I 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 more than 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. I also find that off-exchange traders introduce more noise into the prices than do exchange members. My findings provide new evidence on the role of different types of traders in the price formation process.