Abstract
Abstract In light of the controversial debate over the measure of Volume-Synchronised Probability of Informed Trading (VPIN), this paper investigates the effectiveness of VPIN as a risk warning signal in the Chinese market. Using intraday transaction data on Chinese stock index futures from 2012 to 2013, we conduct a comparative analysis of VPIN metrics using three trade classification methods: the tick rule (TR), the Lee-Ready (LR) algorithm, and bulk volume (BV). We assess the predictive ability of VPIN metrics for two highly volatile market events in China: the Money Shortage Event in June 2013 and the Fat Finger Event on 16 August 2013. Our results suggest that BV-VPIN has the best risk warning effect in signalling the occurrence of volatile events. Our work suggests that BV-VPIN can be used in the prevalent high-frequency trading (HFT) mechanism of the current financial world.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
