Is Informed Trading Different Across Investor Types?*

Abstract

This study compares the extent of informed trading across investor types in the Korean stock market using intraday quote and trade data. We estimate for each stock the probability of information‐based trading (PIN) using trades that are initiated by foreign investors, domestic institutional investors, and local individual investors separately. The results show that the PIN values of foreign and domestic institutional investors are much higher than those of individual investors. Contrary to the belief of some market participants, however, we find that local institutional investors engage in more informed trading than foreign institutional investors.