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Information and Noise in U.K. Futures Markets

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  • Phil Holmes
  • Mark Tomsett

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. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:711–731, 2004

Suggested Citation

  • Phil Holmes & Mark Tomsett, 2004. "Information and Noise in U.K. Futures Markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 24(8), pages 711-731, August.
    • Handle: RePEc:wly:jfutmk:v:24:y:2004:i:8:p:711-731
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    Cited by:

    1. Riza Emekter & Benjamas Jirasakuldech & Peter Went, 2012. "Rational speculative bubbles and commodities markets: application of duration dependence test," Applied Financial Economics, Taylor & Francis Journals, vol. 22(7), pages 581-596, April.
    2. Tu, Anthony H. & Wang, Ming-Chun, 2007. "The innovations of e-mini contracts and futures price volatility components: The empirical investigation of S&P 500 stock index futures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(2), pages 198-211, April.

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