One Research On The Effectiveness Of The Probability Of Information-based Trading As An Information Measure

Information is an important basis for investment decisions makers as well as the discovery of financial asset prices. To explore the probability of information-based trading as an indicator of private information is of great significance. The probability of information-based trading as a measure of degree of asymmetric information refers to the proportion trade volume of informed traders of all trading in a particular asset. In this paper, the calculation of the probability of information-based trading is based on EKOP model proposed by Easley, Kiefer, O’ Hara and Paperman in 1996.The method to estimate the probability of information-based trading has been recognized by many scholars and has applied to a large number of empirical studies. This paper try to explore the effectiveness of probability of information-based trading based on three different views.The probability of information-based trading can effectively identify the high content of private information company: Previous studies have shown that certain characteristics company has high content of private information. Using high frequency history data and building the annual probability of informed trading index, this apart explores the probability of informed trading index with the panel regression empirical methods.The probability of information-based trading can effectively find the stock price: on the basis of the annual high frequency data, this part uses Fama-French three factor model to build four-factor model. This part use the information-based trading as a fourth factor of price discovery, also adopts the method of panel regression, explore if the probability of informed trading as the fourth factor can be further found and explain the excess return of stock.The probability of information-based trading can effectively measure the market attention: first, build market awareness index, this article use the sell-side analysts covering every namely wind years consistent forecasters number of direct measure of attention as a market index, high sell-side analysts covering number indicates high attention, and vice versa. Through the same panel regression method, at the same time, combining with the Granger causality test, this part try to study the effectiveness of the probability of information-based trading in reflecting the level of market attention.