RT Journal Article
SR Electronic
T1 Defeating the VPIN: <em>Slipping into the Noise</em>
JF The Journal of Trading
FD Institutional Investor Journals
SP 37
OP 47
DO 10.3905/jot.2017.12.3.037
VO 12
IS 3
A1 E. Dan Glikstein
A1 Lawrence Kryzanowski
YR 2017
UL https://pm-research.com/content/12/3/37.abstract
AB We use the volume synchronized probability of informed trading (VPIN) to evaluate the performance of different trading strategies in an order-driven simulated market. The performance of this nonparametric metric is assessed in terms of informed traders exploiting its weaknesses when mimicking the trade behavior of uninformed traders and in its protection of market makers from the risk of trading with an informed trader. We show that an informed trader can accumulate a larger position while a pooling equilibrium holds by exploiting the VPIN structure, that the VPIN has a high rate of false-positives, and that it may detect informed trading under certain conditions.TOPICS: Performance measurement, simulations, statistical methods