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A New Estimation for Informed Trading Based on SSNF Method

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Abstract

This paper estimates the information-based trading using spatially selective noise filtration (SSNF) method. The SSNF method is a kind of filtration technique based on the different spatial correlation of the wavelet transform at several adjacent scales. Using SSNF method, the information shock caused by the informed traders could be extracted from the prices effectively, then the PINs at different scales could be calculated. The measure of informed trading can capture some asymmetric information properties, which is consistent with some empirical consensuses. Furthermore, compared with the MLE method in EKOP model, the method has computational facilities in avoiding the overflow or underflow problem, the boundary solutions problem and the initial values problem. And the method could be applied to the high-frequency world in both order-driven and quote-driven market.

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Author information

Authors and Affiliations

  1. School of Economics and Management, Beihang University, Beijing, 100191, China

    Tao Bing, Shangmei Zhao & Shancun Liu

  2. School of Economics and Management, Beijing University of Chemical Technology, Beijing, 100029, China

    Qiang Zhang

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  1. Tao Bing
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  2. Shangmei Zhao
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  3. Qiang Zhang
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  4. Shancun Liu
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Corresponding author

Correspondence to Qiang Zhang.

Additional information

This research was supported by the National Natural Science Foundation of China under Grant Nos. 71371023, 71371024, 71373017, 71171146, and 71771008.

This paper was recommended for publication by Editor WANG Shouyang.

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Bing, T., Zhao, S., Zhang, Q. et al. A New Estimation for Informed Trading Based on SSNF Method. J Syst Sci Complex 31, 988–1002 (2018). https://doi.org/10.1007/s11424-017-6278-2

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  • DOI: https://doi.org/10.1007/s11424-017-6278-2

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