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PINstimation: Estimating Models of Probability of Informed Trading

R-CMD-check License: GPL v3 CRAN Downloads

PINstimation provides utilities for the estimation of probability of informed trading models: original PIN (PIN) in Easley and O’Hara (1992) and Easley et al. (1996); multilayer PIN (MPIN) in Ersan (2016); Adjusted PIN (AdjPIN) in Duarte and Young (2009); and volume- synchronized PIN (VPIN) in Easley et al. (2011, 2012). Various computation methods suggested in the literature are included. Data simulation tools and trade classification algorithms are among the supplementary utilities. The package enables fast and precise solutions for the sophisticated, error-prone and time-consuming estimation procedure of the probability of informed trading measures, and it is compact in the sense detailed estimation results can be achieved by solely the use of raw trade level data.

New features in Version 0.1.2

Table of contents

Main functionalities

The functionalities that the package offers are summarized below:

Installation

The easiest way to get PINstimation is the following:

install.packages("PINstimation")

To get a bugfix or to use a feature from the development version, you can install the development version of PINstimation from GitHub.

# install.packages("devtools")
# library(devtools)
devtools::install_github("monty-se/PINstimation", build_vignettes = TRUE)

Loading the package

library(PINstimation)

Examples

Example 1: Estimate the PIN model

We estimate the PIN model on preloaded dataset dailytrades using the initial parameter sets of Ersan & Alici (2016).

estimate <- pin_ea(dailytrades)
## [+] PIN Estimation started 
##   |[1] Likelihood function factorization: Ersan (2016)
##   |[2] Loading initial parameter sets   : 5 EA initial set(s) loaded
##   |[3] Estimating PIN model (1996)      : Using Maximum Likelihood Estimation
##   |+++++++++++++++++++++++++++++++++++++| 100% of PIN estimation completed
## [+] PIN Estimation completed

Example 2: Estimate the Multilayer PIN model

We run the estimation of the MPIN model on preloaded dataset dailytrades using:

ml_estimate <- mpin_ml(dailytrades)
## [+] MPIN estimation started
##   |[1] Detecting layers from data       : using Ersan and Ghachem (2022a)
##   |[=] Number of layers in the data     : 3 information layer(s) detected
##   |[2] Computing initial parameter sets : using algorithm of Ersan (2016)
##   |[3] Estimating the MPIN model        : Maximum-likelihood standard estimation
##   |+++++++++++++++++++++++++++++++++++++| 100% of mpin estimation completed
## [+] MPIN estimation completed
ecm_estimate <- mpin_ecm(dailytrades)
## [+] MPIN estimation started
##   |[1] Computing the range of layers    : information layers from 1 to 8
##   |[2] Computing initial parameter sets : using algorithm of Ersan (2016)
##   |[=] Selecting initial parameter sets : max 100 initial sets per estimation
##   |[3] Estimating the MPIN model        : Expectation-Conditional Maximization algorithm
##   |+++++++++++++++++++++++++++++++++++++| 100% of estimation completed [8 layer(s)]
##   |[3] Selecting the optimal model      : using lowest Information Criterion (BIC)
## [+] MPIN estimation completed

Compare the aggregate parameters obtained from the ML, and ECM estimations.

mpin_comparison <- rbind(ml_estimate@aggregates, ecm_estimate@aggregates)
rownames(mpin_comparison) <- c("ML", "ECM")
cat("Probabilities of ML, and ECM estimations of the MPIN model\n")
print(mpin_comparison)

Display the summary of the model estimates for all number of layers.

summary <- getSummary(ecm_estimate)
show(summary)
##          layers em.layers  MPIN Likelihood    AIC    BIC    AWE
## Model[1]      1         1 0.566  -3226.469 6462.9 6473.4 6508.9
## Model[2]      2         2 0.577   -800.379 1616.8 1633.5 1690.3
## Model[3]      3         3 0.574   -643.458 1308.9 1332.0 1410.0
## Model[4]      4         3 0.574   -643.458 1308.9 1332.0 1410.0
## Model[5]      5         3 0.574   -643.458 1308.9 1332.0 1410.0
## Model[6]      6         3 0.574   -643.458 1308.9 1332.0 1410.0
## Model[7]      7         4 0.575   -642.631 1313.3 1342.6 1441.9
## Model[8]      8         4 0.575   -642.631 1313.3 1342.6 1441.9

Example 3: Estimate the Adjusted PIN model

We estimate the adjusted PIN model on preloaded dataset dailytrades using 20 initial parameter sets computed by the algorithm of Ersan and Ghachem (2022b).

estimate_adjpin <- adjpin(dailytrades, initialsets = "GE")
show(estimate_adjpin)
## [+] AdjPIN estimation started
##   |[1] Computing initial parameter sets : 20 GE initial sets generated
##   |[2] Estimating the AdjPIN model      : Maximum-likelihood Standard Estimation
##   |+++++++++++++++++++++++++++++++++++++| 100% of AdjPIN estimation completed
## [+] AdjPIN estimation completed

Example 4: Estimate the Volume-adjusted PIN model

We run a VPIN estimation on preloaded dataset hfdata with timebarsize of 5 minutes (300 seconds).

estimate.vpin <- vpin(hfdata, timebarsize = 300)
show(estimate.vpin)
## ----------------------------------
## VPIN estimation completed successfully.
## ----------------------------------
## Type object@vpin to access the VPIN vector.
## Type object@bucketdata to access data used to construct the VPIN vector.
## Type object@dailyvpin to access the daily VPIN vectors.
## 
## [+] VPIN descriptive statistics
## 
## |      | Min.  | 1st Qu. | Median | Mean  | 3rd Qu. | Max.  | NA's |
## |:-----|:-----:|:-------:|:------:|:-----:|:-------:|:-----:|:----:|
## |value | 0.101 |  0.185  | 0.238  | 0.244 |  0.29   | 0.636 |  49  |
## 
## 
## [+] VPIN parameters
## 
## | tbSize | buckets | samplength |   VBS    | #days |
## |:------:|:-------:|:----------:|:--------:|:-----:|
## |  300   |   50    |     50     | 36321.25 |  77   |
## 
## -------
## Running time: 3.753 seconds

Example 5: Estimate the AdjPIN model using aggregated high-frequency data

We use the preloaded high-frequency dataset hfdata, prepare it for aggregation.

data <- hfdata
data$volume <- NULL

We classify data using the LR algorithm with a time lag of 500 milliseconds (0.5 s), using the function aggregate_data().

daytrades <- aggregate_trades(data, algorithm = "LR", timelag = 500)
## [+] Trade classification started
##   |[=] Classification algorithm         : LR algorithm
##   |[=] Number of trades in dataset      : 100 000 trades
##   |[=] Time lag of lagged variables     : 500 milliseconds
##   |[1] Computing lagged variables       : using parallel processing
##   |+++++++++++++++++++++++++++++++++++++| 100% of variables computed
##   |[=] Computed lagged variables        : in 7.68 seconds
##   |[2] Computing aggregated trades      : using lagged variables
## [+] Trade classification completed                

We use the obtained dataset to estimate the (adjusted) probability of informed trading via the standard Maximum-likelihood method.

adjpin_ml <- adjpin(daytrades, method = "ML", initialsets = "GE")
## [+] AdjPIN estimation started
##   |[1] Computing initial parameter sets : 20 GE initial sets generated
##   |[2] Estimating the AdjPIN model      : Maximum-likelihood Standard Estimation
##   |+++++++++++++++++++++++++++++++++++++| 100% of AdjPIN estimation completed
## [+] AdjPIN estimation completed

Note to frequent users

If you are a frequent user of PINstimation, you might want to avoid repetitively loading the package PINstimation whenever you open a new R session. You can do that by adding PINstimation to .R profile either manually, or using the function load_pinstimation_for_good().

To automatically load PINstimation, run load_pinstimation_for_good(), and the following code will be added to your .R profile.

if (interactive()) suppressMessages(require(PINstimation))

After restart of the R session, PINstimation will be loaded automatically, whenever a new R session is started. To remove the automatic loading of PINstimation, just open the .R profile for editing usethis::edit_r_profile(), find the code above, and delete it.

Resources

For a smooth introduction to, and useful tips on the main functionalities of the package, please refer to:

Contributions

The package makes a series of original contributions to the literature:

Alternative packages

To our knowledge, there are three preexisting R packages for the estimation of models of the probability of informed trading: pinbasic, InfoTrad, and FinAsym.

Getting help

If you encounter a clear bug, please file an issue with a minimal reproducible example on GitHub.

These binaries (installable software) and packages are in development.
They may not be fully stable and should be used with caution. We make no claims about them.
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