Permanent Price Impact Asymmetry of Trades with Institutional Constraints

45 Pages Posted: 26 Jul 2017

See all articles by Chiraphol N. Chiyachantana

Chiraphol N. Chiyachantana

Singapore Management University; Singapore Management University - Lee Kong Chian School of Business

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics

Christine X. Jiang

Fudan University

Vivek Sharma

University of Memphis - Finance

Date Written: July 24, 2017

Abstract

Dynamic institutional trading constraints related to capital, diversification, and short-selling asymmetrically affect the incorporation of new information as reflected in the permanent price impact of their trades. The sign of the permanent price impact asymmetry between institutional buys versus sells is positive at the initial stage of a price run-up and reverses due to changing constraints with a prolonged price run-up in a stock. Idiosyncratic volatility, analyst forecast dispersion, trading intensity, price dispersion, and bullish market conditions further sharpen the initial asymmetry, as well as its reversal after a price run-up.

Keywords: Permanent Price Impact Asymmetry, Institutional Investors, Information Asymmetry

JEL Classification: G14, G23

Suggested Citation

Chiyachantana, Chiraphol N. and Jain, Pankaj K. and Jiang, Christine X. and Sharma, Vivek, Permanent Price Impact Asymmetry of Trades with Institutional Constraints (July 24, 2017). Available at SSRN: https://ssrn.com/abstract=3007603 or http://dx.doi.org/10.2139/ssrn.3007603

Chiraphol N. Chiyachantana

Singapore Management University ( email )

Lee Kong Chian School of Business
50 Stamford Road
Singapore, 178899
Singapore
65-6828-0776 (Phone)
65-6828-0427 (Fax)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

Christine X. Jiang

Fudan University ( email )

School of Management
Shanghai, 200433
China
862125011085 (Phone)

Vivek Sharma (Contact Author)

University of Memphis - Finance ( email )

Office 421
3675 Central Avenue
Memphis, TN 38152
United States
3127207979 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
30
Abstract Views
745
PlumX Metrics