The PIN anomaly around M&A announcements |
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Institution: | 1. Université Catholique de Louvain, IAG, 1 place des Doyens, 1348 Louvain-la-Neuve, Belgium;2. Université de Lille 2, ESA, 1 place Déliot—BP 381, 59020 Lille, France;3. Université de Toulouse 1, Manufacture des Tabacs, 21 allée de Brienne, 31000 Toulouse, France |
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Abstract: | The probability of information-based trading (PIN) introduced by Easley and O’Hara (1987) has been increasingly used in empirical research in finance. We investigate its behavior around a sample of merger and acquisition announcements that took place on Euronext Paris between 1995 and 2000. The behavior of the PIN seems to be in contradiction with clear evidence of information leakages in our sample during the pre-event period. We investigate the reasons for its unusual behavior and raise some concerns about its use as an information-based trading indicator, at least around major corporate events. |
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