Abstract
In this study we compare the extent of informed trading across investor types in the Korean stock market using intraday quote and trade data from January 2006 to September 2013. We estimate for each stock the probability of information-based trading (PIN) using trades that are initiated by foreign institutional investors, domestic institutional investors, and domestic individual investors separately. The results show that PIN values of foreign and domestic institutional investors are much higher than those of individual investors. Contrary to the belief of some market participants, however, we find that PIN values of foreign institutional investors are lower than those of domestic institutional investors, suggesting that domestic institutional investors engage in more informed trading than foreign institutional investors. We also find a strong cross-sectional relation between PIN and stock/firm attributes.
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