Abstract
This Paper analyzes 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. In particular, we find increases in the sound level precede periods of high price volatility and increased trading volumes. Increases in the sound level also presage the placement of block trades and relative increases in customer-driven trading. Our results add to our understanding of the market price formation process and offer important implications for the future of open outcry and floor-based trading mechanisms.
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