BY: JOSHUA D. COVAL
University of Michigan Business School
Department of Finance and Real Estate
TYLER G. SHUMWAY
University of Michigan Business School
Department of Finance and Real Estate
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Paper ID: University of Michigan Business School Working Paper
No. 98024
Date: November 1998
Contact: JOSHUA D. COVAL
Email: Mailto:coval at umich.edu
Postal: University of Michigan Business School
Department of Finance and Real Estate
Ann Arbor, MI 48109-1234 USA
Phone: 734-764-2313
Co-Auth: TYLER G. SHUMWAY
Email: Mailto:shumway at umich.edu
Postal: University of Michigan Business School
Department of Finance and Real Estate
Ann Arbor, MI 48109-1234 USA
Paper Requests:
Contact Christine Miotto, Univ. of Michigan Business School, 701
Tappen, Rm A2120, Ann Arbor, MI 48109-1234.
Mailto:christine_miotto_at_umbus-adm3 at ccmail.bus.umich.edu
ABSTRACT:
This Paper analyzes the information content of the ambient noise
level in the Chicago Board of Trade's 30-year Treasury Bond
futures trading pit. Controlling for a variety of other
variables, including lagged price changes, trading volumes, and
news announcements, we find that the sound level conveys
information which is highly economically and statistically
significant. In particular, we find increases in the sound level
precede periods of high price volatility and increased trading
volumes. Increases in the sound level also presage the placement
of block trades and relative increases in customer-driven
trading. Our results add to our understanding of the market
price formation process and offer important implications for the
future of open outcry and floor-based trading mechanisms.
JEL Classification: G13, G14