Research On Asset Pricing And Trading Strategy Based On PIN Method

In the theory of market microstructure,information asymmetry has been a high concern of many scholars.In 1996,Easley,Kiefer,O'Hara and Paperman proposed the use of informed trade probability(PIN)indicators to measure the information asymmetry in securities market.Since then,there have been a lot of PIN-based related research,one of the main directions is to examine whether the PIN can be used as an asset pricing factor.The vast majority of foreign literature,including Easley & O'Hara(2002),found that there was a significant positive correlation between PIN and stock yield.However,the domestic literature has come to the opposite conclusion.From the perspective of risk and profitability,investors will bear the risk of investment losses when facing information asymmetry,theoretically they will require a positive risk premium as compensation.Is the empirical result of the Chinese stock market really contrary to the theoretical expectations? In view of our country in this area of research is still relatively limited,it is necessary to do a more comprehensive empirical test.Firstly,aiming at the measure of information asymmetry,this paper analyzes the advantages and disadvantages of the classical PIN model and VPIN model in detail,and puts forward the VWPIN model based on physical time and transaction volume.Then,we take the stock of the main board,the small plate and the GEM in 2012 as the research object,measure the probability of the informed transaction of the stock,and make a comparative analysis of the various measurement indexes.Furthermore,we have studied the role of different PIN in asset pricing,and carried out the robustness test based on the improved VWPIN model.Finally,this paper discusses the early warning role of informed trade probability index in stock price fluctuation and the effectiveness of constructing quantitative trading strategy.The results of this paper show that the improved VWPIN model overcomes the shortcomings of the traditional model to a certain extent,which makes it possible to estimate the degree of information asymmetry in any time window,and it has more flexibility and wide application value.At the same time we found that the GEM market information asymmetry is higher than the main board and small board market,and trading light stocks higher than the active trading of stocks.With regard to the pricing of assets,we found that there is a significant positive correlation between the probability of informed transaction and the yield after controlling the relevant influencing factors,which is consistent with the theoretical conclusion of the foreign literature.In addition,the probability of informed transaction is sensitive to the length of the estimated time window,and when the window is too long,the estimate is biased so that the regression results are distorted,which explains to some extent the conclusion that the PIN has a negative effect on the yield or has no significant effect in the study of domestic low-frequency data.Furthermore,the probability of informed transaction has a certain guiding significance for the construction of quantitative trading strategy,it can play an important early warning role in the stock price ups and downs,and provide a reference for stock selection in the strategy design.The innovation of this paper is as follows: Firstly,the traditional knowledge transaction probability measurement method is improved,and the VWPIN model is proposed,which overcomes the shortcomings of the existing model data overflow can not be estimated and can not measure any time window.Secondly,the sub-plate has done a comprehensive empirical test on China's stock market,and found that there is a significant positive correlation between the probability of informed transaction and the yield,which is in line with the theoretical expectation.Finally,a quantitative trading strategy is constructed based on the probability of informed transaction.In general,this paper analyzes the influence of information asymmetry on asset price in China's stock market by measuring the probability index of informed trading of individual stocks.The conclusion of this study not only enriches and develops the market microstructure theory,but also analyzes the pricing of assets Supervision,quantitative trading and other applications have a certain reference value.