Economics at your fingertips  

VPIN, liquidity, and return volatility in the U.S. equity markets

Serhat Yildiz, Bonnie Van Ness and Robert Van Ness

Global Finance Journal, 2020, vol. 45, issue C

Abstract: We examine the volume-synchronized probability of informed trading metric (the VPIN flow toxicity metric, developed by Easley, Lopez de Prado, & O'Hara, 2012) as a real-time risk management tool for liquidity deteriorations in the U.S. equity markets. We find that VPIN provides information about market liquidity and stock return volatility on ex-ante basis. These results indicate that VPIN can be a useful risk-management tool for market makers, regulators and traders in the U.S. equity markets. We also document that VPIN is negatively associated with volume and number of trades, but positively associated with trade size and volume fragmentation. These findings suggest that VPIN indicates the adverse selection problem of liquidity providers by capturing the information in volume.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.gfj.2019.100479

Access Statistics for this article

Global Finance Journal is currently edited by Manuchehr Shahrokhi

More articles in Global Finance Journal from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-10-17
Handle: RePEc:eee:glofin:v:45:y:2020:i:c:s1044028318302679