Asymmetry in the permanent price impact of block purchases and sales: theory and empirical evidence

Alex Frino; Vito Mollica; Maria Grazia Romano; Zeyang Zhou

doi:10.1002/fut.21822

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

Macquarie Graduate School of Management

Research output: Contribution to journal › Article › peer-review

4 Citations (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 language	English
Pages (from-to)	359-373
Number of pages	15
Journal	The Journal of Futures Markets
Volume	37
Issue number	4
DOIs	https://doi.org/10.1002/fut.21822
Publication status	Published - Apr 2017

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10.1002/fut.21822

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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.",

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Asymmetry in the permanent price impact of block purchases and sales: theory and empirical evidence

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