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A New Estimation Method of the Probability of Informed Trading

In: The 19th International Conference on Industrial Engineering and Engineering Management

Author

Listed:
  • Chun-lian Xiong

    (Tianjin University
    Tianjin Institute of Urban Construction)

  • Hua-gui Duan

    (Nankai University)

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.

Suggested Citation

  • Chun-lian Xiong & Hua-gui Duan, 2013. "A New Estimation Method of the Probability of Informed Trading," Springer Books, in: Ershi Qi & Jiang Shen & Runliang Dou (ed.), The 19th International Conference on Industrial Engineering and Engineering Management, edition 127, chapter 0, pages 1-10, Springer.
    • Handle: RePEc:spr:sprchp:978-3-642-38433-2_1
    DOI: 10.1007/978-3-642-38433-2_1
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