Estimating the probability of informed trading: A Bayesian approach

The Probability of Informed Trading (PIN) is a widely used indicator information asymmetry risk in the trading securities. Its estimation using maximum likelihood algorithms has been shown to be problematic, resulting biased or unavailable estimates, especially case liquid and frequently traded assets. We provide an alternative approach estimating PIN by means Bayesian method that addresses some shortcomings existing strategies. leads natural quantification uncertainty which may prove helpful their use interpretation. also easy toolbox for PIN.