A New Estimation Method of the Probability of Informed Trading

Chun-lian Xiong () and Hua-gui Duan
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Chun-lian Xiong: Tianjin University
Hua-gui Duan: Nankai University

Chapter Chapter 1 in The 19th International Conference on Industrial Engineering and Engineering Management, 2013, pp 1-10 from Springer

Abstract: Abstract The measure of asymmetric information is an important problem in the market microstructure theories. This paper uses MMPP model to model the number of transactions, then the model is used to estimate the probability of informed trading. Our methodology extends the EKOP framework by allowing the arrival rates of traders to vary over time and the probability of news to vary. It can be used to estimate higher frequency PIN, such as daily PIN. Our estimation of PIN can also be applied to stocks with large number of transactions.

Keywords: Informed trading; Markov-modulated poisson process; PIN; Uninformed trading (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-38433-2_1

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DOI: 10.1007/978-3-642-38433-2_1

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