Internet, noise trading and commodity prices

Massimo Peri (), Daniela Vandone () and Lucia Baldi ()

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: We study the effect of an increased noise trading caused by easier access to information on agricultural futures prices. The theoretical framework is the Mixture Distribution Hypothesis (MDH), that posits a joint dependence of return volatility and information. We use two different proxies for the observed component of information flows, which allows to separate the effect of supply and demand of information. We analyse the effect of information demand using the Internet Search Volume from Google Insight. Empirical results support the MDH and highlight that the search of information on internet by noise traders can amplify volatility.

Keywords: Noise trading; commodity futures prices; information; mixture distribution hypothesis; egarch (search for similar items in EconPapers)
JEL-codes: C32 G13 G14 Q11 (search for similar items in EconPapers)
Date: 2012-06-01
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Citations: View citations in EconPapers (3)

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