Asymmetry in the permanent price impact of block purchases and sales

theory and empirical evidence

Alex Frino, Vito Mollica, Maria Grazia Romano

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contribution

Abstract

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.
Original languageEnglish
Title of host publication8th CSEF-IGIER Symposium on Economics and Institutions
Subtitle of host publicationprogramme and papers
Place of PublicationNaples, Italy
PublisherCentre for Studies in Economics and Finance (CSEF)
Pages1-36
Number of pages36
Publication statusPublished - 2012
EventCSEF-IGIER Symposium on Economics and Institutions (8th : 2012) - Anacapri, Italy
Duration: 25 Jun 201229 Jun 2012

Conference

ConferenceCSEF-IGIER Symposium on Economics and Institutions (8th : 2012)
CityAnacapri, Italy
Period25/06/1229/06/12

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Keywords

  • block trade
  • market impact
  • asymmetry

Cite this

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).