Probability of Informed Trading? Some Evidences Around Corporate Events

43 Pages Posted: 11 Apr 2003

See all articles by Nihat Aktas

Nihat Aktas

WHU - Otto Beisheim School of Management

Eric de Bodt

NHH

Fany Declerck

University of Toulouse 1

Hervé Van Oppens

Catholic University of Louvain (UCL) - Department of Business Administration (IAG) - Finance Unit

Date Written: April 1, 2003

Abstract

The Probability of Informed Based Trading (PIN), built on a structural sequential trade model introduced in 1987 by Easley and O'Hara, has been increasingly used in empirical research in finance. However, up to now, its behavior around corporate events has not been really investigated (at our knowledge). We present in this work a first set of results around mergers and acquisitions on a sample of 141 operations that take place on Euronext Paris during the period 1995-2000. As our results are surprising (the PIN decreases before the event and increases after), we investigate the PIN by a simulation work in an attempt to a better understanding of its behavior. Results confirm that some concerns can be raised about the real capacity of the PIN to capture the presence of informed based trading, at least around major corporate events.

Note: Previously titled "PIN? Some Evidences Around Corporate Event Announcements"

Keywords: probability of informed based trading, mergers and acquisitions, corporate events

JEL Classification: G14, G34

Suggested Citation

Aktas, Nihat and de Bodt, Eric and Declerck, Fany and Van Oppens, Hervé, Probability of Informed Trading? Some Evidences Around Corporate Events (April 1, 2003). Available at SSRN: https://ssrn.com/abstract=391567 or http://dx.doi.org/10.2139/ssrn.391567

Nihat Aktas (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Eric De Bodt

NHH ( email )

Helleveien 30
Bergen, NO-5045
Norway

Fany Declerck

University of Toulouse 1 ( email )

Universite des Sciences Sociales
Manufacture des Tabacs - MF 308 21, allee de Brienne
31000 Toulouse
France
33 561 128 570 (Phone)
33 561 225 563 (Fax)

HOME PAGE: http://go.to/fdeclerck

Hervé Van Oppens

Catholic University of Louvain (UCL) - Department of Business Administration (IAG) - Finance Unit ( email )

1 place des Doyens
B-1348 Louvain-la-Neuve
Belgium
32-10-478-324 (Fax)

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