Testing VPIN on Big Data – Response to 'Reflecting on the VPIN Dispute'

3 Pages Posted: 31 Aug 2013

See all articles by Kesheng Wu

Kesheng Wu

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab)

Wes Bethel

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab)

Ming Gu

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab)

David Leinweber

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab)

Oliver Ruebel

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab)

Date Written: August 30, 2013

Abstract

In their note titled “Reflecting on the VPIN Dispute,” Andersen and Bondarenko (AB) questioned the validity of using the false positive rate to measure the effectiveness of VPIN. However, their objection was based on an imperfect definition of the false positive rate, not taking into account the fact that we have addressed the key shortcoming of that definition. AB argued that VPIN was ineffective because it would produce too many events, but our report showed that the average number of events is quite modest on a large variety of data. They also raised a number of non-technical issues about our work. In the interest of maintaining the integrity of the research record, we would like to address their points.

Keywords: false positive rate, probability of informed trading, VPIN

JEL Classification: C02, D52, D53, G14, G23

Suggested Citation

Wu, Kesheng and Bethel, Wes and Gu, Ming and Leinweber, David and Ruebel, Oliver, Testing VPIN on Big Data – Response to 'Reflecting on the VPIN Dispute' (August 30, 2013). Available at SSRN: https://ssrn.com/abstract=2318259 or http://dx.doi.org/10.2139/ssrn.2318259

Kesheng Wu (Contact Author)

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab) ( email )

1 Cyclotron Road
Berkeley, CA 94720
United States

Wes Bethel

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab) ( email )

1 Cyclotron Road
Berkeley, CA 94720
United States

Ming Gu

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab) ( email )

1 Cyclotron Road
Berkeley, CA 94720
United States

David Leinweber

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab) ( email )

1 Cyclotron Road
Berkeley, CA 94720
United States

Oliver Ruebel

University of California, Berkeley - Lawrence Berkeley National Laboratory (Berkeley Lab) ( email )

1 Cyclotron Road
Berkeley, CA 94720
United States

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