Does PIN Affect Equity Prices Around the World?

Abstract

This study examines the empirical controversy over the pricing effect of Easley, Hvidkjaer, and O'Hara's (2002) probability of information-based trading, PIN, on a sample of 30,095 firms from 47 countries worldwide. Contrary to the empirical evidence of Easley, Hvidkjaer, and O'Hara, but consistent with that of Duarte and Young (2009), we find no evidence that PIN exhibits a positive effect on a cross-section of expected stock returns in international markets. Alternative information-based trading measures also display no effect on expected stock returns, corroborating our finding that information risk proxied by PIN, in general, has no pricing effect in world markets.

Keywords: International Markets, Information Asymmetry, PIN, Asset Pricing

JEL Classification: G11, G12, G23