Hi,
I am trying to calculate the Probability of Informed Trading (PIN) using the codes provided by WRDS. However, i am getting some warnings and error messages in running the codes. Here are samples of warnings and error messages:
ERROR: Execution Errors for _OBS_= 209 :
ERROR: There are references to missing variables when the program code is executed for _OBS_= 209
WARNING: Your program statements cannot be executed completely.
WARNING: In a total of 312 calls an error occurred during execution of the program statements. NLP attempted to recover by using a
shorter step size.
The codes that i am using are the followings:
options ls=132 ps=max nocenter nodate nonumber fullstimer;
proc sort data=buysell; by RIC; run;
/*--------------------------------------------------------------------*/
/* This is the procedure used to maximize the log-likelihood function specified below. */
/* This particular factorization of the log-likelihood function appears in the paper Easley, David, Robert F. Engle, Maureen O'Hara, and Liuren Wu, 2001, "Time-Varying Arrival Rates of Informed and Uninformed Trades", AFA 2002 Atlanta Meetings, Available at SSRN: http://ssrn.com/abstract=294870 */
/*--------------------------------------------------------------------*/
proc nlp data=buysell noprint out=work.pinest (keep = RIC ALPHA ETA MU);
by RIC;
max loglik;
decvar ALPHA, DELTA, ETA, MU;
M = min(buys,sells) + max(buys,sells) / 2.0 ;
x = eta / (mu + eta) ;
bounds 0.0 < eta mu, 0.0 <= alpha delta <= 1.0 ;
loglik = -2.0 * eta + M * log(x) + (buys + sells) * log(mu + eta) +
log( alpha * (1.0 - delta) * exp(-1.0 * mu) * (x ** (sells - M )) +
alpha * delta * exp(-1.0 * mu) * (x ** (buys - M)) +
(1.0 - alpha) * (x ** (buys + sells - M)) ) ;
run;
proc sort data = work.pinest nodupkey;
by RIC;
run;
data work.pinest; set work.pinest;
PIN = alpha * mu / (alpha * mu + 2.0 * eta) ;
label pin = 'Probability of informed trading' ;
format pin 5.3 ;
run;
I have no clues how to resolve the issue. Can someone please help? I have added sample data in the attached data section. Thanks.
Have you looked at observation 209 in your data set?
If either mu or eta have a missing value then x = eta / (mu + eta) ; is performing a divide by missing value as (mu + eta) would be missing.
If eta=0 then x would be 0 and the LOG(x) is undefined in the LOGLIK calculation.
Similar log( alpha * (1.0 - delta) * exp(-1.0 * mu) * (x ** (sells - M )) is undefined if delta=1: 1-delta would be 0 and the 0 is multiplied by the other bits so the result is 0 and Log(0) again
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