Does the PIN Model Mis-Identify Private Information and If So, What is the Alternative?

59 Pages Posted: 14 Feb 2015 Last revised: 16 Jul 2018

See all articles by Jefferson Duarte

Jefferson Duarte

Rice University

Edwin Hu

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis

Lance A. Young

University of Washington - Department of Finance and Business Economics

Date Written: November 24, 2017

Abstract

We show that the PIN model is no more useful in identifying private-information arrival than simply looking at whether turnover is above average or not. This calls into question PIN as a measure of private information since turnover varies for many reasons unrelated to private-information arrival. We also examine an alternative to the PIN model, the Odders-White and Ready (2008) model. Our tests indicate that measures of private information based on the Odders-White and Ready (2008) model are promising alternatives to PIN.

Keywords: Liquidity; Information Asymmetry

JEL Classification: G14

Suggested Citation

Duarte, Jefferson and Hu, Edwin and Young, Lance A., Does the PIN Model Mis-Identify Private Information and If So, What is the Alternative? (November 24, 2017). Available at SSRN: https://ssrn.com/abstract=2564369 or http://dx.doi.org/10.2139/ssrn.2564369

Jefferson Duarte (Contact Author)

Rice University ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States
713.3486137 (Phone)

Edwin Hu

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis ( email )

United States Securities and Exchange Commission
100 F St NE
Washington, DC 20549
United States

Lance A. Young

University of Washington - Department of Finance and Business Economics ( email )

Box 353200
Seattle, WA 98195
United States

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