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

Hendrik Bessembinder, Kalok Chan, Paul J. Seguin

Research output: Contribution to journalArticle

123 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 languageEnglish (US)
Pages (from-to)105-134
Number of pages30
JournalJournal of Financial Economics
Volume40
Issue number1
DOIs
StatePublished - 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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