Price Impact Asymmetry of Block Trades: An Institutional Trading Explanation

Posted: 29 Feb 2008

See all articles by Gideon Saar

Gideon Saar

Cornell University - Samuel Curtis Johnson Graduate School of Management

Multiple version iconThere are 4 versions of this paper

Date Written: October 2001

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.

Suggested Citation

Saar, Gideon, Price Impact Asymmetry of Block Trades: An Institutional Trading Explanation (October 2001). Review of Financial Studies, Vol. 14, Issue 4, pp. 1153-1181, 2001, Available at SSRN: https://ssrn.com/abstract=900662

Gideon Saar (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

431 Sage Hall
Ithaca, NY 14853
United States
607-255-7484 (Phone)
607-255-5993 (Fax)

HOME PAGE: https://www.johnson.cornell.edu/Faculty-And-Research/Profile?id=gs25

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
673
PlumX Metrics