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The Asymmetry of the Price Impact of Block Trades and the Bid-Ask Spread. Evidence from the London Stock Exchange

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Author Info

  • Andros Gregoriou

    (Brunel Business School, Economics and Finance Section, Brunel University)

Abstract

In this paper we examine the price impact of block trades for FTSE 100 firms over the time period 1998-2004. Resembling previous research we find evidence of an asymmetric price impact between block purchases and sales. We suggest that bid-ask bias may be a new conjecture to the asymmetry in the differences in buyer and seller initiated trades.

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File URL: http://repec.org/mmf2006/up.25250.1145441479.pdf
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Bibliographic Info

Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 76.

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Date of creation: 02 Feb 2007
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Handle: RePEc:mmf:mmfc06:76

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Web page: http://www.essex.ac.uk/afm/mmf/index.html

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Keywords: Block Trades; Bid-Ask Bias; Asymmetry; Market Microstructure;

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  1. Engle, Robert F. & Patton, Andrew J., 2004. "Impacts of trades in an error-correction model of quote prices," Journal of Financial Markets, Elsevier, vol. 7(1), pages 1-25, January.
  2. Harris, Lawrence, 1989. "A Day-End Transaction Price Anomaly," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(01), pages 29-45, March.
  3. Michael Aitken & Amaryllis Kua & Philip Brown & Terry Watter & H. Y. Izan, 1995. "An Intraday Analysis of the Probability of Trading on the ASX at the Asking Price," Australian Journal of Management, Australian School of Business, vol. 20(2), pages 115-154, December.
  4. Gemmill, Gordon, 1996. " Transparency and Liquidity: A Study of Block Trades on the London Stock Exchange under Different Publication Rules," Journal of Finance, American Finance Association, vol. 51(5), pages 1765-90, December.
  5. Lease, Ronald C & Masulis, Ronald W & Page, John R, 1991. " An Investigation of Market Microstructure Impacts on Event Study Returns," Journal of Finance, American Finance Association, vol. 46(4), pages 1523-36, September.
  6. Ellis, Katrina & Michaely, Roni & O'Hara, Maureen, 2000. "The Accuracy of Trade Classification Rules: Evidence from Nasdaq," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(04), pages 529-551, December.
  7. Keim, Donald B & Madhaven, Ananth, 1996. "The Upstairs Market for Large-Block Transactions: Analysis and Measurement of Price Effects," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 1-36.
  8. Jennifer S. Conrad, 2001. "Institutional Trading and Soft Dollars," Journal of Finance, American Finance Association, vol. 56(1), pages 397-416, 02.
  9. Heflin, Frank & Shaw, Kenneth W., 2000. "Blockholder Ownership and Market Liquidity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(04), pages 621-633, December.
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Cited by:
  1. Fei Ren & Li-Xin Zhong, 2011. "Price impact asymmetry of institutional trading in Chinese stock market," Papers 1110.3133, arXiv.org.
  2. Ren, Fei & Zhong, Li-Xin, 2012. "The price impact asymmetry of institutional trading in the Chinese stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(8), pages 2667-2677.

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