Journal of Economics and Finance

, Volume 31, Issue 3, pp 283–301

Inferring trader behavior from transaction data: A trade count model

Authors

    • Sprott School of BusinessCarleton University
Article

DOI: 10.1007/BF02885720

Cite this article as:
Jackson, D. J Econ Finan (2007) 31: 283. doi:10.1007/BF02885720

Abstract

We present a model that uses trade counts to infer the arrival of private news and the probability of informed trading (PIN). Although similar in approach, our model avoids problems with factor-driven biases and standard errors associated with estimating the buy-sell model of Easley et al. (1996). In particular, tests using the probability of informed trading may suffer from spurious correlations between the Easley et al. (1996) PIN and firm or market characteristics. Results for our model suggest that trade counts, independent of trade direction, are able to capture important features of a firm’s information environment. (JEL C51, D82)

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© Springer 2007