The probability and magnitude of information events

• 成果类型: Article
• 署名作者: Odders-White, Elizabeth R.; Ready, Mark J.
• 署名单位: University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2007.01.003
• 发表日期: 2008
• 页码: 227-248
• 关键词: microstructure; informed traders; information events

摘要

Models of adverse selection risk generally assume that market makers offset expected losses to informed traders with expected gains from the uninformed. We recognize that the expected loss captures a combination of two effects: (1) the probability that some traders have private information, and (2) the likely magnitude of that information. We use a maximum-likelihood approach to separately estimate the probability and magnitude of private information events for NYSE-listed stocks from 1993 through 2003. The results shed light on the price discovery process and have implications for many areas of finance. (c) 2007 Elsevier B.V. All rights reserved.