Information-based trade in the Shanghai stock market

Wong, Woon K.; Copeland, Laurence; Zeng, Yong

Abstract

We show that the probability of information-based trade (PIN) played a significant role in explaining monthly returns on Shanghai A shares over the period 2001 to 2006. In particular, PIN, as approximated by order imbalance as a proportion of total transactions, appears to explain returns even after controlling for risk in the much-cited Fama and French [Fama, E. F. & French, K. R. (1992). The Cross-Section of Expected Stock Returns. Journal of Finance, XLVII, 427-465.] three-factor model. However, we also find that some of the PIN effect appears to be indistinguishable from a turnover effect. © 2009 Elsevier Inc.

• Journal Article Type: Article
• Publication Date: Jun 29, 2009
• Journal: Global Finance Journal
• Print ISSN: 1044-0283
• Publisher: Elsevier
• Peer Reviewed: Not Peer Reviewed
• Volume: 20
• Issue: 2
• Pages: 180-190
• DOI: https://doi.org/10.1016/j.gfj.2009.02.002
• Keywords: information-based trade, asset pricing, Shanghai stock exchange
• Public URL: https://uwe-repository.worktribe.com/output/1001517
• Publisher URL: http://dx.doi.org/10.1016/j.gfj.2009.02.002