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
Date Written: November 24, 2017
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: Suggested Citation