|
Estimating Multilayer Probability of Informed Trading (MPIN) in Financial Market Microstructure Framework; A Case Study of the Financial Intermediary Sector
|
Reza Taleblou1   , Parisa Mohajeri *1 |
| 1- Associate Professor of Economics, Allameh Tabataba'i University |
|
|
Abstract: (295 Views) |
Accurately determining the level of information asymmetry is crucial for traders to make appropriate decisions regarding asset selection, timing, risk level redefinition, and required rate of return. It is also essential for regulators to achieve designing a well-functioning market. The Probability of Informed Trading (PIN) is one of the important measures of market microstructure that is generally used to estimate the level of information asymmetry. Estimating PIN can be challenging due to boundary solutions, local maxima, and Floating Point Exceptions (FPE). Additionally, the prevailing assumption of the existence of only one information layer per trading day in PIN is inconsistent with the real-world empirical evidence and exposes it to a considerable underestimation bias. In this paper, using two models, Probability of Informed Trading (PIN) and Multilayer Probability of Informed Trading (MPIN), within the framework of financial market microstructure, we estimate the level of information asymmetry for 66 active companies in the financial intermediation sector during the period from 1396:1 to 1402:1. According to our findings, first, the level of private information in stock trading has increased significantly, with an average information asymmetry of 35.6% and 26.6% based on the MPIN and PIN measures, respectively. Second, only 7.7% of the dataset has one layer of information, while for 72%, 2 to 5 layers of information are present, and for the remaining 20%, more than 6 layers of information are identified, indicating bias estimates of PIN. Third, the least information asymmetry is observed in the banking sector, and the highest in the leasing sector. Fourth, the symbols "Weskab" and "Vatoba" have experienced the lowest (26.4%) and the highest (55.5%) levels of information asymmetry, respectively.
|
Article number: 4 |
| |
|
|
Full-Text [PDF 1094 kb]
(219 Downloads)
|
Type of Study: Empirical Study |
Subject:
Financial Institutions and Services (G2)
Received: 2024/06/15 | Accepted: 2024/10/9 | Published: 2024/10/30
|
|
|
|
|
|
|
| References |
|
1. دولو، م. و عزیزی، ن. (1396). واکاوی منشأ قیمت‌گذاری ریسک اطلاعات؛ شواهدی از معیار احتمال معاملات آگاهانهٔ تعدیل‌شده. تحقیقات مالی، 19(3)، 438-415. 2. طالبلو، ر. و رحمانیانی، م. (1396). اندازه‌گیری سطح عدم تقارن اطلاعات برای شرکت‌های منتخب فعال در بورس اوراق بهادار تهران: احتمال مبادلهٔ آگاهانه (PIN). تحقیقات مدلسازی اقتصادی، 29، 73-98. 3. طالبلو، ر.، شاکری، ع.، و رحمانیانی، م. (1398). مقایسهٔ روش‌های مختلف تخمین احتمال مبادلهٔ آگاهانه در بورس اوراق بهادار تهران. پژوهش‌های اقتصادی ایران، 24 (78)، ۱-۲۹. 4. طالبلو، ر. و مهاجری، پ. (1401). اتصالات و سرریز ریسک در بازار سهام ایران، یک تحلیل بخشی با به‌کارگیری مدل خودرگرسیون برداری با پارامترهای متغیر طی زمان (TVP-VAR). مدلسازی اقتصادسنجی، 7(3)، 95-125. 5. مهاجری، پ. و طالبلو، ر. (1401). بررسی پویایی‌های سرریز تلاطمات بین بازده بخش‌ها با رویکرد اتصالات خودرگرسیون برداری با پارامترهای متغیر در طول زمان (TVP-VAR)؛ شواهدی از بازار سهام ایران. تحقیقات اقتصادی، 57(2)، 3۲۱-3۵۶. 6. طالبلو، ر. و مهاجری، پ. (1402). سنجش محتوای اطلاعات در معاملات سهام؛ شواهدی از بازار سرمایهٔ ایران. تحقیقات اقتصادی، 58(3)، 4۳۳-4۵۸. 7. مهاجری، پ. و طالبلو، ر. (1402). برآورد عدم تقارن اطلاعات با استفاده از معیارهای ریزساختار بازار؛ مطالعهٔ موردی شرکت‌های بورسی حوزهٔ انرژی ایران. پژوهشنامهٔ اقتصاد انرژی ایران، انتشار آنلاین از 20 آذر 1402. 8. Aslan, H., Easley, D., Hvidkjaer, S., & O'Hara, M. (2011). The characteristics of informed trading: Implications for asset pricing. Journal of Empirical Finance, 18, 782-801. [ DOI:10.1016/j.jempfin.2011.08.001] 9. Atilgan, Y. (2014). Volatility spreads and earnings announcement returns. Journal of Banking and Finance, 38, 205-215. [ DOI:10.1016/j.jbankfin.2013.10.007] 10. Brown, S., Hillegeist, S. A., & Lo, K. (2008). The effect of earnings surprises on information asymmetry. Journal of Accounting and Economics, 47 (3), 208-225. [ DOI:10.2139/ssrn.922128] 11. Cepoi, C.O., Dragota, V., Trifan, R. & Lordache, A. (2023). Probability of informed trading during the COVID-19 pandemic: The case of the romanian stock market. Financial Innovation, 9(34), 1-27. [ DOI:10.1186/s40854-022-00415-9] [ PMID] [ ] 12. Chen, Y., & Zhao, H. (2012). Informed trading, information uncertainty, and price momentum. Journal of Banking and Finance, 36(7), 2095-2109. [ DOI:10.1016/j.jbankfin.2012.03.016] 13. Cruces, J. J., & Kawamura, E. (2005). Insider trading and corporate governance in Latin America. Research Network Working Paper, R-513, Inter-American Development Bank. [ DOI:10.2139/ssrn.1815889] 14. Duarte, J. & Young, L. (2009). Why is pin priced? Journal of Financial Economics, 91(2), 119-138. [ DOI:10.1016/j.jfineco.2007.10.008] 15. Easley D., & O'Hara, M. (1992). Time and the process of security price adjustment. Journal of Finance, 47(2), 577-605 [ DOI:10.1111/j.1540-6261.1992.tb04402.x] 16. Easley D., Kiefer, N. M., O'Hara, M, & Paperman, J. B. (1996). Liquidity, information, and infrequently traded stocks. The Journal of Finance, 51(4), 1405. [ DOI:10.1111/j.1540-6261.1996.tb04074.x] 17. Easley, D., Kiefer, N. M. & O'Hara, M. (1997). The information content of the trading process. Journal of Empirical Finance, 4(2-3), 159-186. [ DOI:10.1016/S0927-5398(97)00005-4] 18. Easley, D., Hvidkjaer, S. & O'Hara, M. (2002). Is information risk a determinant of asset returns? The Journal of Finance, 57(5), 2185-2221. [ DOI:10.1111/1540-6261.00493] 19. Easley, D., Engle, R.F., O'hara, M., & Wu, L. (2008). Time-varying arrival rates of informed and uninformed trades. Journal of Financial Econometrics, 6(2), 171-207. [ DOI:10.1093/jjfinec/nbn003] 20. Easley, D., Hvidkjaer, S., & O'Hara, M. (2010). Factoring information into returns. Journal of Financial and Quantitative Analysis, 45(2), 293-309. [ DOI:10.1017/S0022109010000074] 21. Easley, D., De Prado, M. M., & O'Hara, M. (2011). The Microstructure of the "Flash Crash": Flow toxicity, liquidity crashes, and the probability of informed trading. Journal of Portfolio Management, 37(2), 118-128. [ DOI:10.3905/jpm.2011.37.2.118] 22. Easley, D., López De Prado, M. M., & O'Hara, M. (2012). Flow toxicity and liquidity in a high-frequency world. Review of Financial Studies, 25(5), 1457-1493. [ DOI:10.1093/rfs/hhs053] 23. Ersan, O. (2016). Multilayer probability of informed trading. SSRN Electronic Journal. [ DOI:10.2139/ssrn.2874420] 24. Ghachem M. & Ersan, O. (2023). PINstimation: An R package for estimating models of probability of informed trading. SSRN Electronic Journal. [ DOI:10.2139/ssrn.4117946] 25. Henry, T. R., Kisgen, D. J., & Wu, J. J. (2015). Equity short selling and bond rating downgrades. Journal of Financial Intermediation, 24, 89-111. [ DOI:10.1016/j.jfi.2014.02.005] 26. Hwang, L. S., Lee, W. J., Lim, S. Y., & Park, K. H. (2013). Does information risk affect the implied cost of equity capital? An analysis of PIN and adjusted PIN. Journal of Accounting and Economics, 55 (2-3), 148-167. [ DOI:10.1016/j.jacceco.2013.01.005] 27. Jayaraman, S., & Shuang Wu, J. (2020). Should I stay or should I grow? Using voluntary disclosure to elicit market feedback. The Review of Financial Studies, 33(8), 38543888. [ DOI:10.1093/rfs/hhz132] 28. Kang, M. (2010). Probability of information-based trading and the January effect. Journal of Banking and Finance, 34(12), 2985-2994. [ DOI:10.1016/j.jbankfin.2010.07.007] 29. Lee, C. M., & Ready, M. J. (1991). Inferring trade direction from intraday data. The Journal of Finance, 46(2), 733-746. [ DOI:10.1111/j.1540-6261.1991.tb02683.x] 30. Ma, R., Marshall, B. R., Nguyen, H. T., Nguyen, N. H., & Visaltanachoti, N. (2022). Climate events and return comovement. Journal of Financial Markets, 61, 100731. [ DOI:10.1016/j.finmar.2022.100731] 31. Vega, C. (2006). Stock price reaction to public and private information. Journal of Financial Economics, 82(1), 103-133. [ DOI:10.1016/j.jfineco.2005.07.011] |
|
| Send email to the article author |
|
|
|
|
