Publication Type

Presentation

Publication Date

2-2009

Abstract

This paper applies the asymmetric autoregressive conditional duration (AACD) model of Bauwens and Giot (2003) to estimate the probability of informed trading (PIN) using irregularly spaced transaction data. We model trade direction (buy versus sell orders) and the duration between trades jointly. Unlike the Easley, Hvidkjaer, and O'Hara(2002) approach, which uses the aggregate numbers of daily buy and sell orders to estimate PIN, our methodology allows for interactions between consecutive buy-sell orders and accounts for the duration between trades and the volume of trade. We extend the Easley-Hvidkjaer-O'Hara framework by allowing the probabilities of good news and bad news to vary each day. Our PIN estimates can be computed daily as well as over intraday intervals.

Discipline

Finance and Financial Management | Portfolio and Security Analysis

Research Areas

Econometrics; Finance

Publication

Singapore Conference on Quantitative Finance

First Page

1

Last Page

27

City or Country

Singapore

Additional URL

http://ssrn.com/abstract=1425981

Share

COinS