Quality of PIN estimates and the PIN-return relationship

Yuxing Yan and Shaojun Zhang

Journal of Banking & Finance, 2014, vol. 43, issue C, 137-149

Abstract: This paper provides new evidence concerning the probability of informed trading (PIN) and the PIN-return relationship. We take measures to overcome known estimation biases and improve the quality of quarterly PIN estimates. We use the average of a firm’s PIN estimates in four consecutive quarters to smooth out the effect of seasonal variation in trading activities. We find that when high-quality PIN estimates are used, the Fama–MacBeth cross-sectional regressions show stronger evidence for the positive PIN-return relationship than documented in the prior literature. This finding is robust to controls for the January, liquidity, and momentum effects.

Keywords: Probability of informed trading; PIN-return relationship; Quality of PIN estimates (search for similar items in EconPapers)
JEL-codes: C13 C61 G12 G14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:43:y:2014:i:c:p:137-149

DOI: 10.1016/j.jbankfin.2014.03.006

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