Abstract
![CDATA[This paper examines how the probability of informed trading (PIN), a measure of information-based trading risk developed by Easley et al (1996), affects the speed at which stock prices adjust to market-wide information. We find that in all but the least active stock portfolios, prices of low PIN stocks are faster to impound market-wide news than those of high PIN stocks. PIN’s significance in explaining individual stock price delay is robust to the inclusion of size, liquidity and risk controls but is subsumed by the level of uninformed trade. Our results suggest that PIN’s role in the delayed response of stock prices is driven by the lack of uninformed or liquidity trading rather than by information asymmetry, and provide new empirical evidence regarding the channel through which trading affects the speed at which stock prices adjust to information. Our findings also suggest that at least part of the “private information” and informed trade captured by PIN relates to the skilled interpretation of public common factor information.]]
| Original language | English |
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| Title of host publication | Proceedings of the 2013 Asian Finance Association (Asian FA) Annual Meeting, 15-17 July 2013, Nanchang, China |
| Publisher | Social Science Research Network |
| Pages | 1-31 |
| Number of pages | 31 |
| Publication status | Published - 2013 |
| Event | Asian Finance Association. Annual Meeting - Duration: 15 Jul 2013 → … |
Conference
| Conference | Asian Finance Association. Annual Meeting |
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| Period | 15/07/13 → … |