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Trading volume and information distribution in a market-clearing framework

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  • Dominique Dupont

Abstract

This paper investigates the relations between aggregate trading volume and information on financial markets from a theoretical standpoint. Through numerical examples, it relates some statistics describing equilibrium price and volume--such as the variance of the price and its correlation with the true asset value, the volume mean, variance, skewness, and kurtosis--to the distribution of information across traders. The analysis is carried out in a static noisy rational expectations framework, with multiple informed traders, where both the precision and the correlation of the signals observed by the traders can be modified.

Suggested Citation

  • Dominique Dupont, 1997. "Trading volume and information distribution in a market-clearing framework," Finance and Economics Discussion Series 1997-41, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:1997-41
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    References listed on IDEAS

    as
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    Financial markets; Stock - Prices;

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