Journal of Economics and Finance

, Volume 31, Issue 3, pp 283–301

Inferring trader behavior from transaction data: A trade count model

Article

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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Copyright information

© Springer 2007

Authors and Affiliations

  1. 1.Sprott School of BusinessCarleton UniversityOttawa

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