Asymmetry in the permanent price impact of block purchases and sales

theory and empirical evidence

Alex Frino, Vito Mollica*, Maria Grazia Romano, Zeyang Zhou

*Corresponding author for this work

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Previous research has identified that the information effects of buyer-initiated trades are greater than seller-initiated trades. We develop a theoretical model that predicts block purchases are relatively more informed in bear markets and block sales are relatively more informed in bull markets. Using a sample of large trades executed in the E-mini S&P 500 index futures and SPDR S&P 500 exchange traded fund, we find evidence consistent with our theoretical model. Our results are robust to volatility and macro-economic news announcements categorized as bullish or bearish.

Original languageEnglish
Pages (from-to)359-373
Number of pages15
JournalThe Journal of Futures Markets
Volume37
Issue number4
DOIs
Publication statusPublished - Apr 2017

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