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Information and Noise in U.K. Futures Markets

✍ Scribed by Phil Holmes; Mark Tomsett

Publisher
John Wiley and Sons
Year
2004
Tongue
English
Weight
180 KB
Volume
24
Category
Article
ISSN
0270-7314

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✦ Synopsis

Abstract

This paper examines the extent to which futures price changes are driven by noise and information for three U.K. futures contracts by utilizing T. Andersen's (1996) specification of the mixture of distributions hypothesis. Use of the generalized method of moments approach demonstrates that the link between futures volume and volatility can be attributed to the flow of information. More importantly, it is shown that price movements are dominated by informed rather than noise trading for the FTSE‐100, the Long Gilt, and the Brent Oil futures contracts. The results suggest that further regulation based on the notion that noise traders dominate futures trading is unwarranted. Β© 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:711–731, 2004

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