A New Measure for Investors’ Private Information

We develop a new measure for investors’ private information (SDPIN) embedded in a stock price. Unlike existing measures such as PIN and DPIN, it considers both trade order size and trade frequency; we argue that private information can also be revealed through trade order size, thereby applying to a broader range of stock trading scenarios. We test the accuracy of our new private information measure against PIN and DPIN and find it to be more precise. Consequently, it reduces information asymmetries among investors and helps managers better assess the private information reflected in their firms’ stock prices, enabling them to make more informed (optimal) decisions.