Quality of PIN estimates and the PIN-return relationship

Yuxing Yan, Shaojun Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

8 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)137-149
Number of pages13
JournalJournal of Banking and Finance
Volume43
Issue number1
DOIs
Publication statusPublished - 1 Jan 2014

Keywords

  • PIN-return relationship
  • Probability of informed trading
  • Quality of PIN estimates

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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