Price Impact Asymmetry of Block Trades: An Institutional Trading Explanation
Year: 2001
Type: article
Abstract: This paper develops a theoretical model to explain the permanent price impact asymmetry between buyer and seller-initiated block trades (the permanent price impact of buys is larger than that of sells). The model shows how the trading strategy of institutional portfolio managers creates a difference between the information content of buys and sells. The main implication of the model is that the history of price performance influences the asymmetry: The longer the run-up in a stock's price, the less the asymmetry. The intensity of institutional trading and the frequency of information events affect the asymmetry differently depending on recent price performance.
Source: Review of Financial Studies
Author: Gideon Saar
Institution: New York University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3121974897