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Noise and information in UK futures markets

Holmes, P.; Tomsett, M.

Authors

P. Holmes

M. Tomsett



Abstract

This paper examines the extent to which futures price changes are driven by noise and information for three U.K. futures contracts by utilizing T. Andersen's (1996) specification of the mixture of distributions hypothesis. Use of the generalized method of moments approach demonstrates that the link between futures volume and volatility can be attributed to the flow of information. More importantly, it is shown that price movements are dominated by informed rather than noise trading for the FTSE-100, the Long Gilt, and the Brent Oil futures contracts. The results suggest that further regulation based on the notion that noise traders dominate futures trading is unwarranted.

Citation

Holmes, P., & Tomsett, M. (2004). Noise and information in UK futures markets. Journal of Futures Markets, 24(8), 711-731. https://doi.org/10.1002/fut.20104

Journal Article Type Article
Publication Date 2004-08
Deposit Date Aug 27, 2008
Journal Journal of Futures Markets
Print ISSN 0270-7314
Electronic ISSN 1096-9934
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 24
Issue 8
Pages 711-731
DOI https://doi.org/10.1002/fut.20104
Public URL https://durham-repository.worktribe.com/output/1600932