Easley, David; Prado, Marcos M. López de; O'Hara, Maureen - In: Review of Financial Studies 25 (2012) 5, pp. 1457-1493
Order flow is toxic when it adversely selects market makers, who may be unaware they are providing liquidity at a loss. We present a new procedure to estimate flow toxicity based on volume imbalance and trade intensity (the VPIN toxicity metric). VPIN is updated in volume time, making it...