The characteristics of informed trading: Implications for asset pricing

Aslan, H; Easley, D; Hvidkjaer, S; O'Hara, M

The characteristics of informed trading: Implications for asset pricing

Aslan, H Easley, D Hvidkjaer, S O'Hara, M

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Publication Type:: Journal Article
Citation:: Journal of Empirical Finance, 2011, 18 (5), pp. 782 - 801
Issue Date:: 2011-12-01

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Field	Value	Language
dc.contributor.author	Aslan, H	en_US
dc.contributor.author	Easley, D	en_US
dc.contributor.author	Hvidkjaer, S	en_US
dc.contributor.author	O'Hara, M	en_US
dc.date.issued	2011-12-01	en_US
dc.identifier.citation	Journal of Empirical Finance, 2011, 18 (5), pp. 782 - 801	en_US
dc.identifier.issn	0927-5398	en_US
dc.identifier.uri	http://hdl.handle.net/10453/115977
dc.description.abstract	This paper investigates the linkage of microstructure, accounting, and asset pricing. We determine the relationship between firm characteristics as captured by accounting and market data and a firm's probability of private information-based trade (PIN) as estimated from trade data. This allows us to determine what types of firms have high information risk. We then use these data to create an instrument for PIN, the PPIN, which we can estimate from firm-specific data. We show that PPINs have explanatory power for the cross-section of asset returns in long sample tests. We also investigate whether information risk vitiates the influence of other variables on asset returns. We develop a PPIN factor and show that it dominates the Amihud factor in asset returns. Our results provide strong support for information risk affecting asset returns in long sample tests. © 2011 Elsevier B.V.	en_US
dc.relation.ispartof	Journal of Empirical Finance	en_US
dc.relation.isbasedon	10.1016/j.jempfin.2011.08.001	en_US
dc.subject.classification	Finance	en_US
dc.title	The characteristics of informed trading: Implications for asset pricing	en_US
dc.type	Journal Article
utslib.citation.volume	5	en_US
utslib.citation.volume	18	en_US
utslib.for	1403 Econometrics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1402 Applied Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.issue	5	en_US
pubs.publication-status	Published	en_US
pubs.volume	18	en_US

Abstract:

This paper investigates the linkage of microstructure, accounting, and asset pricing. We determine the relationship between firm characteristics as captured by accounting and market data and a firm's probability of private information-based trade (PIN) as estimated from trade data. This allows us to determine what types of firms have high information risk. We then use these data to create an instrument for PIN, the PPIN, which we can estimate from firm-specific data. We show that PPINs have explanatory power for the cross-section of asset returns in long sample tests. We also investigate whether information risk vitiates the influence of other variables on asset returns. We develop a PPIN factor and show that it dominates the Amihud factor in asset returns. Our results provide strong support for information risk affecting asset returns in long sample tests. © 2011 Elsevier B.V.

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http://hdl.handle.net/10453/115977