Does the Probability of Informed Trading Measure Informed Trading?

Recent research has raised concerns over whether the probability of informed trading model (PIN) is an appropriate proxy of information asymmetry. We investigate PIN and test whether the model can detect illegal insider trading prior to M&A announcements. We then compare the performance of PIN to an alternative proxy, the PIN asymmetric autoregressive conditional duration model (PIN-AACD), to determine if this model offers a better proxy for informed trading. We find that PIN does not measure informed trading prior to M&A announcements, and that PIN-AACD offers a better measure of information asymmetry