Duarte and Young (2009) decompose PIN into adjusted PIN (AdjPIN) and probability of trading caused by symmetric order flow shocks (PSOS). We explore sources of PSOS in the Korean stock market and examine the relation between PSOS and stock returns. Using transaction data with trader types and initiator information, we find that AdjPIN is not priced, while PSOS is negatively priced, a finding that Lai, Ng, and Zhang (2014) labeled “puzzling.” We find that the negative price of PSOS comes from differences of opinion among domestic individual investors on the significance of public news.
December 24, 2016
2016 Working Papers