ProbInformedTrading · Liquidity · Easley, Hvidkjaer and O'Hara (2002)

Probability of Informed Trading

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1994Q1 to 2013Q4.

Expected return · posterior mean, % per year, averaged over the window

Next quarter

2026Q4

8.18%

95% interval −5.94% to 21.24%

Next year

2026Q4–2027Q3

8.17%

95% interval −6.00% to 21.27%

Next five years

2026Q4–2031Q3

8.16%

95% interval −6.30% to 21.40%

Forecast made 16 Sep 2026, conditioning on this portfolio's OAP returns, which end 2013Q4. The 51 quarters between then and 2026Q4 are unobserved and are integrated out under the model.

Some sorts are greyed out for this signal: the universe is small enough that their buckets hold as few as 11 names per leg, below the 12-name floor, which is a pair trade rather than a portfolio. A wider sort is shown instead.

Cumulative market-adjusted return

+577% since 1994Q1 · log scale

Past performance, annualized

Window	Mean	Vol.	Sharpe	t
1994Q1–2013Q4	14.30%	28.79%	0.50	2.22
2009Q1–2013Q4	−12.80%	32.59%	−0.39	−0.88
2013Q1–2013Q4	16.86%	14.54%	1.16	1.16
1994Q1–2013Q4	15.62%	29.36%	0.53	2.38
2009Q1–2013Q4	−4.41%	35.73%	−0.12	−0.28
2013Q1–2013Q4	17.61%	21.81%	0.81	0.81
1994Q1–2013Q4	10.63%	40.00%	0.27	1.19
2009Q1–2013Q4	−21.92%	38.56%	−0.57	−1.27
2013Q1–2013Q4	3.21%	7.94%	0.40	0.40
1994Q1–2013Q4	11.63%	40.00%	0.29	1.30
2009Q1–2013Q4	−17.58%	42.64%	−0.41	−0.92
2013Q1–2013Q4	−2.47%	13.65%	−0.18	−0.18

Forecast Sharpe ratio, annualized

Window	Mean	95% interval	P(neg)
2026Q4	0.28	−0.21 – 0.74	0.12
2026Q4–2027Q3	0.27	−0.19 – 0.71	0.12
2026Q4–2031Q3	0.24	−0.15 – 0.68	0.12
2026Q4	0.33	−0.15 – 0.77	0.08
2026Q4–2027Q3	0.32	−0.14 – 0.75	0.08
2026Q4–2031Q3	0.29	−0.11 – 0.72	0.08
2026Q4	0.15	−0.31 – 0.58	0.25
2026Q4–2027Q3	0.14	−0.29 – 0.56	0.25
2026Q4–2031Q3	0.13	−0.24 – 0.53	0.25
2026Q4	0.17	−0.29 – 0.60	0.22
2026Q4–2027Q3	0.17	−0.27 – 0.58	0.22
2026Q4–2031Q3	0.15	−0.22 – 0.55	0.22