Internet, noise trading and commodity futures prices

- We analyze commodity futures price volatility.
- We test the effect of noise traders due easier access to data through internet.
- We use a novel source of information provided by Google: “Google Insights”.
- The theoretical framework is the Mixture Distribution Hypothesis (MDH).
- The empirical analysis spans from 2004 to 2011.
- Results highlight information search from internet amplifies volatility of corn prices.

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.