Information-Based Trade in the Shanghai Stock Market
23 Pages Posted: 10 Mar 2008 Last revised: 23 Jul 2009
Date Written: May 4, 2009
We show that the probability of information-based trade (PIN) played a significant role in explaining monthly returns on Shanghai A shares over the period 2001 to 2006. In particular, PIN, as approximated by order imbalance as a proportion of total transactions, appears to explain returns even after controlling for risk in the much-cited Fama and French (1992) three-factor model. However, we also find that some of the PIN effect appears to be indistinguishable from a turnover effect.
JEL Classification: G12, G14, G15
Suggested Citation: Suggested Citation