We investigate whether market makers with inventory concerns are compensated with subsequent monthly returns in the cross-section. We find a significant negative relation between order flows and monthly returns, “the order flow effect,” suggesting that market makers lower prices for stocks...

This paper explores the role of private information on idiosyncratic return variation. We suggest that there is a significant positive relationship between informed trade and firm-specific return variation. Using the probability of information-based trading (PIN) as a measure of informed trade,...

We investigate the seasonality in the probability of information-based trading (PIN)-return relationship, the 'January PIN effect'. We find that on average stock returns decrease with PIN in January, in contrast to other calendar months. This pattern is more apparent for small stocks. We argue...

This paper examines the dual e ffects of informed trading on expected returns: information transmission and information risk. We show that the relationship between informed trading and expected returns can be non-linear in theory and is indeed non-linear empirically. Specifically, the...