Probability of Information-Based Trading as a Pricing Factor in Taiwan Stock Market

29 Pages Posted: 2 Apr 2008

See all articles by Ralph C. Lu

Ralph C. Lu

Ming Chuan University - Department of Finance

Woon K. Wong

IMRU, Cardiff Business School

Date Written: July 2008

Abstract

Easley, Hvidkjaer and O'Hara (2002) study the role of information-based trading in affecting U.S. asset returns. They find that information risk or the probability of information-based trading (PIN) is a determinant of the expected returns of NYSE listed stocks. In this paper, we investigate whether emerging financial markets also share similar findings. Specifically, we use transactions and quote data of Taiwan Stock Exchange to measure PIN. Cross-sectional asset pricing tests show that PIN is a significant pricing factor in Taiwan stock market. An increase of ten percentage point in PIN on average requires an additional of four to seven percent in annual stock returns.

Keywords: Information-based trading, cross-sectional asset pricing test

JEL Classification: G12, G14, G15

Suggested Citation

Lu, Ralph C. and Wong, Woon K., Probability of Information-Based Trading as a Pricing Factor in Taiwan Stock Market (July 2008). Available at SSRN: https://ssrn.com/abstract=1115419 or http://dx.doi.org/10.2139/ssrn.1115419

Ralph C. Lu

Ming Chuan University - Department of Finance ( email )

No. 250, Section 5
Zhongshan North Road
Taipei, 111
Taiwan

Woon K. Wong (Contact Author)

IMRU, Cardiff Business School ( email )

Cardiff CF10 3EU
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
274
Abstract Views
1,512
rank
113,025
PlumX Metrics