Review of Financial Studies Vol. 14 No. 4 2001
Price Impact Asymmetry of Block Trades: An Institutional Trading Explanation
Abstract
This article 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.
- DOI
- 10.1093/rfs/14.4.1153
- Volume
- 14
- Issue
- 4
- Pages
- 1153-1181
- Language
- en
- Sources
- openalex crossref