VPIN and the flash crash

Torben G. Andersen*, Oleg Bondarenko

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


The Volume-Synchronized Probability of Informed trading (VPIN) metric is introduced by Easley, López de Prado, and O'Hara (2011a) as a real-time indicator of order flow toxicity. They find the measure useful in monitoring order flow imbalances and conclude that it may help signal impending market turmoil, exemplified by historical high readings of the metric prior to the flash crash. More generally, they show that VPIN is significantly correlated with future short-term return volatility. In contrast, our empirical investigation of VPIN documents that it is a poor predictor of short run volatility, that it did not reach an all-time high prior, but rather after, the flash crash, and that its predictive content is due primarily to a mechanical relation with the underlying trading intensity. Preliminary experimentation suggests that signed order flow indicators may contain useful information for gauging real-time market stress indicators. Nonetheless, we caution against the adoption of any specific metric until its performance has been compared thoroughly to suitable benchmarks, including the type of analysis we undertake in this paper.

Original languageEnglish (US)
JournalJournal of Financial Markets
StateAccepted/In press - Nov 20 2012


  • Flash crash
  • High-frequency trading
  • Order flow toxicity
  • Order imbalance
  • PIN
  • VIX
  • Volatility forecasting
  • VPIN

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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