English, Article, Journal or magazine article edition: Estimating the Probability of Informed Trading - Does Trade Misclassification Matter? Joachim Grammig; Erik Theissen

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/52777
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Estimating the Probability of Informed Trading - Does Trade Misclassification Matter?
Author
  • Joachim Grammig
  • Erik Theissen
Physical Description
  • preprint
Notes
  • RePEc:usg:dp2003:2003-01
  • Easley /​ Kiefer /​ O'Hara /​ Paperman (1996) (EKOP) have proposed an empirical methodology that allows to estimate the probability of informed trading and that has subsequently been used to address a wide range of issues in market microstructure. The data needed for estimation is the number of buyer- and seller-initiated trades. This information often has to be inferred by applying trade classification algorithms like the one proposed by Lee /​ Ready (1991). These algorithms are known to be inaccurate. In this paper we perform extensive simulations to show that inaccurate trade classification leads to biased estimation of the probability of informed trading when applying the EKOP methodology. The estimate is biased downward and the magnitude of the bias is related to the trading intensity of the stock in question. Scrutinizing prior empirical studies using the EKOP methodology, we conclude that the bias may severely affect the results of empirical microstructure studies.
  • Informed trading, market microstructure, trade classification
  • RePEc:bon:bonedp:bgse37_2002
Language
  • English
Contributed by
OAIster

Get this edition

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment