Resumo:
We propose and estimate a model of endogenous informed trading that is a hybrid of the PIN
and Kyle models. When an informed trader trades optimally, both returns and order flows
are needed to identify information asymmetry parameters. Empirical relationships between
the model’s estimates and price impacts, excess kurtosis, and volatility are consistent with
theory. We illustrate how the estimates can be used to detect information events in the time
series and to characterize the information content of prices in the cross section. We also
compare the estimates to those from other models on various criteria.
Back, K., Crotty, K., and T. Li, 2018, “Identifying Information Asymmetry in Securities Markets,” Review of Financial Studies 31, 2277–2325
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