Internet, noise trading and commodity futures prices

• DOI: 10.1016/j.iref.2014.03.006
• Publication Date: 2014-03-25T05:45:54Z
• Authors: Massimo Peri; Daniela Vandone; Lucia Baldi
• Keywords: 0502 economics and business; 05 social sciences; C32; Corn price volatility; EGARCH; G13; G14; Information; Mixture Distribution Hypothesis; Noise trading; Q11

Abstract This paper relates to internet, noise trading and commodity 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 internet searches and information published in newspapers. We analyse the effect of information from the internet 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.