Can Market Frictions Really Explain the Price Impact Asymmetry of Block Trades? Evidence from the Saudi Stock Market
18 Pages Posted: 19 Jan 2010
Date Written: October 2009
We empirically examine the price impact of block trades, in the Saudi Stock Market over the time period of 2005-2008. Using a unique dataset of intraday data consisting of 2.3 million block buys and 1.9 million block sales, we find an asymmetry in the price impact of block purchases and sales. The asymmetry persists even when we account for the bid-ask bias in block trades, which is contrary to the previous literature. Overall, our findings suggest that in an emerging market where institutional trading is relatively scarce, market microstructure cannot explain the asymmetry in the price impact of large trades.
Keywords: Saudi Stock Market, Bid-Ask Spreads, Block Trades, Intraday Data
JEL Classification: G10, G14
Suggested Citation: Suggested Citation