Asymmetry in the Permanent Price Impact of Block Purchases and Sales: Theory and Empirical Evidence
This paper extends previous research which has examined the market impact of large transactions in bull and bear markets by examining the information effects of trades. Previous research has demonstrated that the information effects of buy trades are greater than the information effects of sell trades. We develop a theoretical model which predicts that this difference is greater in bear markets than bull markets, consistent with the (almost counter-intuitive) proposition that buy trades are relatively more informed in bear markets. Using a sample of trades executed on the NYSE in bull and bear market periods, we find evidence consistent with our primary theoretical model
|Date of creation:||Nov 2012|
|Publication status:||Published in Working Papers, november 2012, pages 1-22|
|Contact details of provider:|| Postal: Via Ponte Don Melillo - 84084 Fisciano (SA)|
Web page: http://www.dises.unisa.it
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Holthausen, Robert W. & Leftwich, Richard W. & Mayers, David, 1987. "The effect of large block transactions on security prices: A cross-sectional analysis," Journal of Financial Economics, Elsevier, vol. 19(2), pages 237-267, December.
- Holthausen, Robert W. & Leftwich, Richard W. & Mayers, David, 1990. "Large-block transactions, the speed of response, and temporary and permanent stock-price effects," Journal of Financial Economics, Elsevier, vol. 26(1), pages 71-95, July.
- Bessembinder, Hendrik, 2003. "Issues in assessing trade execution costs," Journal of Financial Markets, Elsevier, vol. 6(3), pages 233-257, May.
- Saar, Gideon, 2001. "Price Impact Asymmetry of Block Trades: An Institutional Trading Explanation," Review of Financial Studies, Society for Financial Studies, vol. 14(4), pages 1153-1181.
- Keim, Donald B. & Madhavan, Ananth, 1995. "Anatomy of the trading process Empirical evidence on the behavior of institutional traders," Journal of Financial Economics, Elsevier, vol. 37(3), pages 371-398, March.
- 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 1765-1790, December.
- 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.
- Chan, Louis K C & Lakonishok, Josef, 1995. " The Behavior of Stock Prices around Institutional Trades," Journal of Finance, American Finance Association, vol. 50(4), pages 1147-1174, September.
- Aitken, Michael & Frino, Alex, 1996. "Execution costs associated with institutional trades on the Australian Stock Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 4(1), pages 45-58, May.
- Lee, Charles M C & Ready, Mark J, 1991. " Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-746, June.
- Chiraphol N. Chiyachantana & Pankaj K. Jain & Christine Jiang & Robert A. Wood, 2004. "International Evidence on Institutional Trading Behavior and Price Impact," Journal of Finance, American Finance Association, vol. 59(2), pages 869-898, 04.
- Easley, David & O'Hara, Maureen, 1987. "Price, trade size, and information in securities markets," Journal of Financial Economics, Elsevier, vol. 19(1), pages 69-90, September.
- Kraus, Alan & Stoll, Hans R, 1972. "Price Impacts of Block Trading on the New York Stock Exchange," Journal of Finance, American Finance Association, vol. 27(3), pages 569-588, June.
- Chan, Louis K. C. & Lakonishok, Josef, 1993. "Institutional trades and intraday stock price behavior," Journal of Financial Economics, Elsevier, vol. 33(2), pages 173-199, April.
When requesting a correction, please mention this item's handle: RePEc:sep:wpaper:3_225. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maria Rizzo)
If references are entirely missing, you can add them using this form.