The determinants of the price impact of block trades: Further evidence

Alex Frino*, Elvis Jarnecic, Andrew Lepone

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)


This article extends previous literature which examines the determinants of the price impact of block trades on the Australian Stock Exchange. As previous literature suggests that liquidity exhibits intraday patterns, we introduce time of day dummy variables to explore time dependencies in price impact. Following theoretical developments in previous literature, the explanatory power of the bid - ask spread, a lagged cumulative stock return variable and a refined measure of market returns are also examined. The model estimated explains approximately 29 per cent of the variation in price impact. Block trades executed in the first hour of trading experience the greatest price impact, while market conditions, lagged stock returns and bid-ask spreads are positively related to price impact. The bid - ask spread provides most of the explanatory power. This suggests that liquidity is the main driver of price impact.

Original languageEnglish
Pages (from-to)94-106
Number of pages13
Issue number1
Publication statusPublished - Mar 2007
Externally publishedYes


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