Abstract
Trading volume studies have traditionally emphasized the correlation between volume and price movements or between volume changes and the arrival of information. This article explores the relationship between volume and the heterogeneity of underlying asset volatility expectations implied by option prices. An index of aggregate trading volume of the S&P 100 index is constructed and shown to be significantly positively related to a measure of heterogeneity of risk expectations. We discuss possible explanations for this phenomenon and its implications for previously-reported volume relationships.
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Trippi, R.R., Harriff, R.B. Trading volume, heterogeneity of expectations, and the disperson of volatilities implied by option prices. Rev Quant Finan Acc 3, 339–351 (1993). https://doi.org/10.1007/BF02406996
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DOI: https://doi.org/10.1007/BF02406996