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Extending The Ekop Model To Estimate The Probability Of Informed Trading

2006; Taylor & Francis; Volume: 30; Issue: 2 Linguagem: Inglês

10.1080/10800379.2006.12106406

2693-5198

J. H. Venter, D.C.J. de Jongh,

Market Dynamics and Volatility

Easley, Kiefer, O'Hara and Paperman (1996 Easley, D, Kiefer, N, O'Hara, M, Paperman, J (1996): “Liquidity, Information, and Infrequently Traded Stocks”, Journal of Finance, 51, 1405-1436.[Crossref], [Web of Science ®] , [Google Scholar]) introduced a model that enables one to estimate the probability of informed trading in a stock using as input data the numbers of buyer and seller initiated trades over a period. Empirical testing suggests that this model does not fit data well. We formulate several extensions of the model improving its ability to fit data and discuss the effects this has on the accuracy of estimating the probability of informed trading.