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Is Sound Just Noise?

Joshua D. Coval and Tyler Shumway
The Journal of Finance
Vol. 56, No. 5 (Oct., 2001), pp. 1887-1910
Published by: Wiley for the American Finance Association
Stable URL: http://www.jstor.org/stable/2697742
Page Count: 24
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Is Sound Just Noise?
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Abstract

We analyze 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. Specifically, changes in the sound level forecast changes in the cost of transacting. Following a rise in the sound level, prices become more volatile, depth declines, and information asymmetry increases. Our results offer important implications for the future of open outcry and floor-based trading mechanisms.

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