Does The "Spiders" Market Attract Uninformed Trading Volume?

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Quentin C. Chu
Dan Zhou



The trading volume of Standard and Poor’s Depository Receipts (SPDRs) - or Spiders - has grown consistently since the inception of trading in 1993.  Theoretical models have predicted that the Spiders market would attract trading volume from uninformed traders because their losses due to adverse trades with informed traders would usually be lower in this market than in individual security markets.  As an extension of the modified mixture distribution hypothesis model proposed by Andersen (1996), this study applies the estimated parameters from the generalized method of moments to derive the percentage trading volume of SPDRs attributable to uninformed trades.  Using ninety securities selected from the S&P 500 index as benchmark stocks for comparison, we find that the Spiders market indeed attracts a relatively higher percentage of trading volume from uninformed traders.


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