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.
|Title of host publication||8th CSEF-IGIER Symposium on Economics and Institutions|
|Subtitle of host publication||programme and papers|
|Place of Publication||Naples, Italy|
|Publisher||Centre for Studies in Economics and Finance (CSEF)|
|Number of pages||36|
|Publication status||Published - 2012|
|Event||CSEF-IGIER Symposium on Economics and Institutions (8th : 2012) - Anacapri, Italy|
Duration: 25 Jun 2012 → 29 Jun 2012
|Conference||CSEF-IGIER Symposium on Economics and Institutions (8th : 2012)|
|Period||25/06/12 → 29/06/12|
- block trade
- market impact
Frino, A., Mollica, V., & Romano, M. G. (2012). Asymmetry in the permanent price impact of block purchases and sales: theory and empirical evidence. In 8th CSEF-IGIER Symposium on Economics and Institutions: programme and papers (pp. 1-36). Naples, Italy: Centre for Studies in Economics and Finance (CSEF).