Journal of Banking & Finance Vol. 43 2014
Quality of PIN estimates and the PIN-return relationship
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.
- DOI
- 10.1016/j.jbankfin.2014.03.006
- Volume
- 43
- Pages
- 137-149
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib