International Journal of Social Science & Economic Research
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Title:
THE FORECAST OF THE PROBABILITY OF INFORMED TRADING ON THE FLASH CRASH-BASED ON THE CSI 300 INDEX FUTURES AND SPOT

Authors:
Zhu Xiaoyu

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Zhu Xiaoyu
College of Economic and Management,
Nanjing University of Aeronautics and Astronautic, Nanjing 210016, China

MLA 8
Xiaoyu, Zhu. "THE FORECAST OF THE PROBABILITY OF INFORMED TRADING ON THE FLASH CRASH-BASED ON THE CSI 300 INDEX FUTURES AND SPOT." Int. j. of Social Science and Economic Research, vol. 4, no. 2, Feb. 2019, pp. 1482-1505, ijsser.org/more2019.php?id=108. Accessed Feb. 2019.
APA
Xiaoyu, Z. (2019, February). THE FORECAST OF THE PROBABILITY OF INFORMED TRADING ON THE FLASH CRASH-BASED ON THE CSI 300 INDEX FUTURES AND SPOT. Int. j. of Social Science and Economic Research, 4(2), 1482-1505. Retrieved from ijsser.org/more2019.php?id=108
Chicago
Xiaoyu, Zhu. "THE FORECAST OF THE PROBABILITY OF INFORMED TRADING ON THE FLASH CRASH-BASED ON THE CSI 300 INDEX FUTURES AND SPOT." Int. j. of Social Science and Economic Research 4, no. 2 (February 2019), 1482-1505. Accessed February, 2019. ijsser.org/more2019.php?id=108.

References
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Abstract:
The paper is intended to explore the impact of information asymmetry on market volatility in high frequency world by providing an examination concerning the probability of informed trading across the related market. I research on the relationship between informed trading and market volatility in spot market, futures market and cross-market scenarios based on the VPIN toxicity metric model. I find that probabilities of informed trading in the CSI300 stock index futures market and spot market in 2015 stood at 0.30 and 0.33 respectively, slightly higher than the previous level. This indicates the existence of index volatility uncertainties. I also find that the futures market's probability of informed trading negatively relates to the spot market liquidity over the following 4 minutes and positively to the spot market volatility over the following 4 minutes. It serves as an early warning of joint crash across futures and spot markets. The futures market's probability of informed trading is an efficient indicator of toxicity-induced illiquidity.