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VPIN, Jump Dynamics and Inventory Announcements in Energy Futures Markets
Author(s) -
Bjursell Johan,
Wang George H. K.,
Zheng Hui
Publication year - 2017
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21839
Subject(s) - futures contract , econometrics , economics , jump , price discovery , financial economics , sample (material) , portfolio , chemistry , physics , chromatography , quantum mechanics
The Volume‐Synchronized Probability of Informed Trading (VPIN) metric is proposed by Easley et al. (2011, 2012) (Journal of Portfolio Management, 37:118–128; Review of Financial Studies, 25:1457–1493) as a real‐time measure of order flow toxicity in an electronic trading market. This study examines the performance of VPIN around inventory announcements and price jumps in crude oil and natural gas futures markets with a sample period from January 2009 to May 2015. We obtain several interesting results: (i) VPIN increases significantly around inventory announcements with price jumps as well as at jumps not associated with any scheduled announcements. (ii) VPIN does not peak prior to the events but shortly after. (iii) A minor variation of VPIN based on exponential smoothing significantly improves the early warning signal property of VPIN, and this estimate of toxicity returns faster to the pre‐event level. © 2017 Wiley Periodicals, Inc. Jrl Fut Mark 37:542–577, 2017