>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.
SUGGESTIONS FOR FURTHER RESEARCH:
Price volatility and ambient noise levels at local fast food restaurants (Taco Fresco--most discriminating palate, Federal Building Food Court--not very discriminating palate, etc.); increasing number of female traders and ambient noise levels; ambient noise levels in the days following a new Derivatives Comic; and as a control ambient noise level in the prison across the street*. Experimental economists may also want to explore what types of noises (whoops, coughs, metal on metal, strings, murmers, detuned marimba, off-key singing) produce the best indicators of volatility.
*In a bizarre bit of architecture and planning, there is a high rise prison right across the street from the Chicago Board of Trade.
Peace,
Jim
"Could anything be more indicative of a slight but general insanity than the aspect of the crowd on the streets of Chicago?" --Charles Horton Cooley (1864-1929), *Human Nature and the Social Order*