The Research of Probability of Informed Trading under Short-Sell Constraints

Jingxia Xu, Jingxia Xu, Susheng Wang, Jijin Geng, Yun Xiong

2022

Abstract

The probability of informed trading is an important indicator for regulators supervising market order. Classic models of the probability of informed trading allow traders short unlimited with private information. However, it has short-sell constraints in China's stock market at present, which would make the measurement deviation occurs if directly apply classic models to China's stock market. Under this condition, this research adds two short-sell constraint parameters to the classic model, named SC-TPIN model, to measure the probability of informed trading of stocks with bad event. By selecting eligible stocks as the sample stocks, this research estimates the probability of informed trading and relevant parameters of those stocks before and after the disclosure day, and analyze and summarize the time characteristics and microscopic characteristics of these parameters. This research proves that the SC-TPIN model is consistent with the order flow information, and the parameters and probability of informed trading estimated by the SC-TPIN model are in line with the actual situation of sample stocks. Compared with the TPIN model, the SC-TPIN model has strong explanatory power in explaining the same time series spreads and strong predictive power in forecasting future spreads in China’s stock market. Therefore, the SC-TPIN model is valid.

Paper Citation

in Harvard Style

Xu J., Wang S., Geng J. and Xiong Y. (2022). The Research of Probability of Informed Trading under Short-Sell Constraints. In Proceedings of the 1st International Conference on Public Management, Digital Economy and Internet Technology - Volume 1: ICPDI; ISBN 978-989-758-620-0, SciTePress, pages 137-144. DOI: 10.5220/0011731700003607

in Bibtex Style

@conference{icpdi22,
author={Jingxia Xu and Susheng Wang and Jijin Geng and Yun Xiong},
title={The Research of Probability of Informed Trading under Short-Sell Constraints},
booktitle={Proceedings of the 1st International Conference on Public Management, Digital Economy and Internet Technology - Volume 1: ICPDI},
year={2022},
pages={137-144},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0011731700003607},
isbn={978-989-758-620-0},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 1st International Conference on Public Management, Digital Economy and Internet Technology - Volume 1: ICPDI
TI - The Research of Probability of Informed Trading under Short-Sell Constraints
SN - 978-989-758-620-0
AU - Xu J.
AU - Wang S.
AU - Geng J.
AU - Xiong Y.
PY - 2022
SP - 137
EP - 144
DO - 10.5220/0011731700003607
PB - SciTePress