A Probability Model of Asset Trading

Thomas E. Copeland

Journal of Financial and Quantitative Analysis, 1977, vol. 12, issue 4, 563-578

Abstract: In a world where individuals are assumed to receive new information about an asset in random and sequential order, the volume of trading for a given message is a random variable. If the probabilities of trading events can be specified, it is possible to develop closed form expressions for the expected number of trades and the variance of trading. The result is a theory of trading which relates the number of trades to the characteristics of the message and to the number of participants in the market for an asset.

Date: 1977
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