Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/13791
Title: An improved estimation method and empirical properties of the probability of informed trading
Authors: Yan, Y
Zhang, S 
Keywords: Boundary solution
PIN
Probability of informed trading
Issue Date: 2012
Publisher: Elsevier
Source: Journal of banking and finance, 2012, v. 36, no. 2, p. 454-467 How to cite?
Journal: Journal of banking and finance 
Abstract: We report evidence that boundary solutions can cause a bias in the estimate of the probability of informed trading (PIN). We develop an algorithm to overcome this bias and use it to estimate PIN for nearly 80,000 stock-quarters between 1993 and 2004. We obtain two sets of PIN estimates by using the factorized likelihood functions in both Easley, Hvidkjaer, and O'Hara (EHO, 2010) and Lin and Ke (LK, 2011), respectively. We find that the estimate based on the EHO factorization is systematically smaller than the estimate based on the LK factorization, meaning that there is a downward bias associated with the EHO factorization. In addition, we find that boundary solutions appear with a very high frequency when the LK factorization is used. Thus it is necessary to use the LK factorization together with the algorithm in this paper. At last, we document several interesting empirical properties of PIN.
URI: http://hdl.handle.net/10397/13791
ISSN: 0378-4266
EISSN: 1872-6372
DOI: 10.1016/j.jbankfin.2011.08.003
Appears in Collections:Journal/Magazine Article

Access
View full-text via PolyU eLinks SFX Query
Show full item record

SCOPUSTM   
Citations

25
Last Week
0
Last month
0
Citations as of Sep 22, 2017

WEB OF SCIENCETM
Citations

24
Last Week
1
Last month
1
Citations as of Sep 21, 2017

Page view(s)

43
Last Week
8
Last month
Checked on Sep 24, 2017

Google ScholarTM

Check

Altmetric



Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.