Can Intraday Probability Of Informed Trading Predict Stock Price Change

Information asymmetry is a common problem in the stock market.Investors can be divided into informed traders and uninformed traders,while the degree of information asymmetry is defined as the ratio of informed investors.The existing literature shows that the more serious the information asymmetry is,the higher risk compensation demanded by investors,which will affect the investor's transaction decision.Based on the high frequency transaction data of CSI 300 component stocks,this paper extends the model proposed by Easley et al.(1996)to estimate the intraday probability of informed trading,and uses it as an index to measure intraday information asymmetry,and studies the information asymmetry in Shanghai and Shenzhen stock market.In detail,this paper divides a trading day into four periods,namely,9:30 a.m.-10:30 a.m.,10:30 a.m.-11:30 a.m.,13:00 p.m.-14:00 p.m.and 14:00 p.m.-15:00 p.m.,and the intraday PIN for each stock can be estimated at each time period.This paper finds that the intraday PIN has a strong intraday seasonal effect.That is,PIN is the highest in the first period,which implied that informed traders prefer centralized trading in this period.Since then,with the release and absorption of the information event,intraday PIN shows a gradual downward trend.At the same time,we find that information asymmetry is positively related to the activity of stock trading,negatively related to the size of the company,and positively related to the company's growth.In addition,this paper further analyzes the ability of intraday PIN to predict the change of stock price,and finds that the intraday PIN of some stocks can predict the intraday rate of return.But the effect of PIN on yield is different from time to time.In the first stage,the comprehensive effect of PIN on yield is positive,however in the second and third stage,the comprehensive effect of PIN on yield is negative.This paper provides new ideas of investment strategies for the securities market investors,especially for uninformed investors,and provides a new perspective for securities market regulators to reduce information asymmetry.