An empirical examination of information, differences of opinion, and trading activity

Hendrik Bessembinder; Kalok Chan; Paul J. Seguin

doi:10.1016/0304-405X(95)00839-7

An empirical examination of information, differences of opinion, and trading activity

Hendrik Bessembinder, Kalok Chan, Paul J. Seguin

Finance

Research output: Contribution to journal › Article › peer-review

155 Scopus citations

Abstract

We investigate the relations between trading volumes and our proxies for information flows and divergences in opinions. We view S&P 500 Index futures' open interest as a useful proxy for divergences of traders' opinions, and find that volumes are higher on days when open interest increases than on days with declines. Volume in individual equities is more closely related to firm-specific information flows, while equity basket volume is more closely associated with market information. This differential impact is greatest for small capitalization stocks where market-wide news has no explanatory power.

Original language	English (US)
Pages (from-to)	105-134
Number of pages	30
Journal	Journal of Financial Economics
Volume	40
Issue number	1
DOIs	https://doi.org/10.1016/0304-405X(95)00839-7
State	Published - Jan 1996

Keywords

Futures markets
Information flows
Open interest
Volatility
Volume

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics
Strategy and Management

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10.1016/0304-405X(95)00839-7

Cite this

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AB - We investigate the relations between trading volumes and our proxies for information flows and divergences in opinions. We view S&P 500 Index futures' open interest as a useful proxy for divergences of traders' opinions, and find that volumes are higher on days when open interest increases than on days with declines. Volume in individual equities is more closely related to firm-specific information flows, while equity basket volume is more closely associated with market information. This differential impact is greatest for small capitalization stocks where market-wide news has no explanatory power.

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KW - Information flows

KW - Open interest

KW - Volatility

KW - Volume

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An empirical examination of information, differences of opinion, and trading activity

Abstract

Keywords

ASJC Scopus subject areas

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