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What does PIN identify? Evidence from the T-bill market

  • Akay, Ozgur (Ozzy)
  • Cyree, Ken B.
  • Griffiths, Mark D.
  • Winters, Drew B.
Registered author(s):

    The probability of informed trading (PIN) measure has been increasingly used in empirical research in finance. However, there is a growing debate as to whether PIN measures information-based or liquidity-based trading. We contribute to the discussion by estimating PIN using transaction data for one-month T-bills. Our PIN estimates exceed those reported for equities, despite it being unlikely that the probability of informed trading is higher in T-bills than equities. We conclude that PIN identifies trading clusters and that the source of the clustering depends on the economics of the market. The economics of the T-bill market suggest discretionary liquidity traders are the likely source of the clustering.

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    Article provided by Elsevier in its journal Journal of Financial Markets.

    Volume (Year): 15 (2012)
    Issue (Month): 1 ()
    Pages: 29-46

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    Handle: RePEc:eee:finmar:v:15:y:2012:i:1:p:29-46
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