Is Information Risk (Pin) Priced?

Several recent papers assume that private information (PIN), proposed by Easley and O'Hara (2002, 2004), is a priced risk factor. We investigate the properties of the PIN factor and find that although PIN characteristics predict future returns only for small firms, the average PIN factor loading for small firms is counter-intuitively negative whereas loadings for large firms are positive. Following Daniel and Titman (1997), we also test whether characteristics associated with PIN or PIN factor loadings predict returns. Results suggest when the PIN characteristic is held constant, increasing PIN loadings is not associated with increased average returns. Our findings cast doubt on whether PIN is a priced risk factor