Differences of opinion make a horse race

A model of trading in speculative markets is based on differencesof opinion among traders. Our purpose is to explain some ofthe empirical regularities that have been documented concerningthe relationship between volume and price and the time-seriesproperties of price and volume. We assume that traders sharecommon prior beliefs and receive common information but differin the way in which they interpret this information. Some resultsare that absolute price changes and volume are positively correlated,consecutive price changes exhibit negative serial correlation,and volume is positively autocorrelated.