This paper develops a model of competitive stock trading where investors are heterogeneous in their information and private investment opportunities, and trade for both informational and noninformational motives. The author examines the relationship between investor heterogeneity and trading volume, and its connection to price dynamics. The findings show that trading volume is positively correlated with absolute changes in prices and dividends. Informational trading and noninformational trading lead to different dynamic relationships between trading volume and stock returns. The model captures two types of investor heterogeneity: heterogeneous investment opportunities and asymmetric information. These heterogeneities result in different dynamic relations between volume and returns. Without information asymmetry, trading is driven by portfolio rebalancing, leading to price changes that are unrelated to future dividends. With information asymmetry, uninformed investors face the risk of trading against informed investors' private information, which can lead to adverse selection and reduced trading volume. The model also shows that public news about future dividends can generate abnormal trading, especially when information asymmetry is high. The analysis has implications for empirical studies on investor heterogeneity and the identification of heterogeneity in asset markets.This paper develops a model of competitive stock trading where investors are heterogeneous in their information and private investment opportunities, and trade for both informational and noninformational motives. The author examines the relationship between investor heterogeneity and trading volume, and its connection to price dynamics. The findings show that trading volume is positively correlated with absolute changes in prices and dividends. Informational trading and noninformational trading lead to different dynamic relationships between trading volume and stock returns. The model captures two types of investor heterogeneity: heterogeneous investment opportunities and asymmetric information. These heterogeneities result in different dynamic relations between volume and returns. Without information asymmetry, trading is driven by portfolio rebalancing, leading to price changes that are unrelated to future dividends. With information asymmetry, uninformed investors face the risk of trading against informed investors' private information, which can lead to adverse selection and reduced trading volume. The model also shows that public news about future dividends can generate abnormal trading, especially when information asymmetry is high. The analysis has implications for empirical studies on investor heterogeneity and the identification of heterogeneity in asset markets.