Can Market Frictions Really Explain the Price Impact Asymmetry of Block Trades? Evidence from the Saudi Stock Market

18 Pages Posted: 19 Jan 2010

See all articles by Ahmed A. Alzahrani

Ahmed A. Alzahrani

Economics and Finance Department,Brunel University; Brunel University London

Andros Gregoriou

University of East Anglia

Date Written: October 2009

Abstract

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

Alzahrani, Ahmed A. and Alzahrani, Ahmed A. and Gregoriou, Andros, Can Market Frictions Really Explain the Price Impact Asymmetry of Block Trades? Evidence from the Saudi Stock Market (October 2009). Available at SSRN: https://ssrn.com/abstract=1538427 or http://dx.doi.org/10.2139/ssrn.1538427

Ahmed A. Alzahrani (Contact Author)

Economics and Finance Department,Brunel University ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

Brunel University London ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

Andros Gregoriou

University of East Anglia ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

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