Is Informed Trading Different Across Investor Types?

33 Pages Posted: 25 Aug 2015

See all articles by Hyejin Park

Hyejin Park

Yonsei University - School of Business

Kee H. Chung

State University of New York at Buffalo - School of Management

In Joon Kim

Yonsei University - School of Business

Date Written: August 24, 2015

Abstract

In this study we compare the extent of informed trading across investor types in the Korean stock market using intraday quote and trade data from January 2006 to September 2013. We estimate for each stock the probability of information-based trading (PIN) using trades that are initiated by foreign institutional investors, domestic institutional investors, and domestic individual investors separately. The results show that PIN values of foreign and domestic institutional investors are much higher than those of individual investors. Contrary to the belief of some market participants, however, we find that PIN values of foreign institutional investors are lower than those of domestic institutional investors, suggesting that domestic institutional investors engage in more informed trading than foreign institutional investors. We also find a strong cross-sectional relation between PIN and stock/firm attributes.

Keywords: Informed trading, Investor types, PIN, Trade initiator, Institutional investors, Foreign investors

JEL Classification: G10, G14

Suggested Citation

Park, Hyejin and Chung, Kee H. and Kim, In Joon, Is Informed Trading Different Across Investor Types? (August 24, 2015). Available at SSRN: https://ssrn.com/abstract=2650101 or http://dx.doi.org/10.2139/ssrn.2650101

Hyejin Park

Yonsei University - School of Business ( email )

50 Yonsei-ro, Seodaemun-gu
Seoul, 120-749
Korea, Republic of (South Korea)

Kee H. Chung (Contact Author)

State University of New York at Buffalo - School of Management ( email )

Buffalo, NY 14260
United States
716-645-3262 (Phone)
716-645-3823 (Fax)

HOME PAGE: http://mgt.buffalo.edu/faculty/academic-departments/finance/faculty/kee-chung.html

In Joon Kim

Yonsei University - School of Business ( email )

Seoul
Korea, Republic of (South Korea)
822-2123-5489 (Phone)
822-364-7828 (Fax)

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