Abstract

http://ssrn.com/abstract=872945
 
 

References (34)



 
 

Citations (5)



 


 



Aiming at Pin: Order Flow, Information, and Liquidity


Gautam Kaul


University of Michigan, Stephen M. Ross School of Business

Qin Lei


University of Michigan at Ann Arbor

Noah Stoffman


Indiana University - Kelley School of Business - Department of Finance

July 16, 2008


Abstract:     
In this study, we model and measure the existence of informed trading. Specifically, we investigate the properties of the widely used measure of informed trading, PIN, developed by Easley and O'Hara, and establish three important features of informed trading. First, the existence of informed trading, and therefore PIN, should be estimated over different trading intervals for stocks of different characteristics. Second, we establish a direct relationship between PIN and the absolute (percentage) order imbalance (AIM). The latter is not only easier to measure, but can also be readily calculated over short horizons. Most importantly, we show that conditions for the theoretical equivalence between estimated PIN and AIM of a stock serve as a guide for the optimal estimation interval that should be used for that particular stock. Finally, and significantly, an investigation around exogenous national security events reveals strong evidence against interpreting PIN and order imbalance as a liquidity measure.

Number of Pages in PDF File: 33

Keywords: Stock Liquidity, Information Asymmetry, Information Content, Order Imbalance, PIN

JEL Classification: G12, G14

working papers series


Download This Paper

Date posted: January 2, 2006 ; Last revised: May 14, 2014

Suggested Citation

Kaul, Gautam and Lei, Qin and Stoffman, Noah, Aiming at Pin: Order Flow, Information, and Liquidity (July 16, 2008). Available at SSRN: http://ssrn.com/abstract=872945 or http://dx.doi.org/10.2139/ssrn.872945

Contact Information

Gautam Kaul
University of Michigan, Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109-1234
United States
734-764-9594 (Phone)
734-647-6861 (Fax)
Qin Lei (Contact Author)
University of Michigan at Ann Arbor ( email )
Ross School of Business
701 Tappan Street
Ann Arbor, MI 48109-1234
United States
HOME PAGE: http://leiq.bus.umich.edu
Noah Stoffman
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
(812) 856-5664 (Phone)
HOME PAGE: http://kelley.iu.edu/nstoffma/

Feedback to SSRN


Paper statistics
Abstract Views: 831
Downloads: 183
Download Rank: 96,093
References:  34
Citations:  5

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.781 seconds