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Price impact of block trades in the Saudi stock market

Listed author(s):
  • Alzahrani, Ahmed A.
  • Gregoriou, Andros
  • Hudson, Robert

This paper examines the price impact of block trades for all listed firms in the Saudi stock market (SSM) using high frequency data. We find an asymmetric price impact for block trades of 0.5% for block purchases and −0.38% for block sales. However, on average, the price effect of a block trade is small and short-lived suggesting that resiliency is high in the market. Moreover, we find a direct relationship between the size of the trades and the level of information asymmetry. The intraday pattern of price impacts is similar to patterns documented in other markets, namely an inverse J-shaped pattern. Finally, sophisticated traders can gain abnormal profits through “free riding” benefiting from overreaction before and price reversals after block trades.

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File URL: http://www.sciencedirect.com/science/article/pii/S1042443112001011
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Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 23 (2013)
Issue (Month): C ()
Pages: 322-341

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Handle: RePEc:eee:intfin:v:23:y:2013:i:c:p:322-341
DOI: 10.1016/j.intfin.2012.11.003
Contact details of provider: Web page: http://www.elsevier.com/locate/intfin

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