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Asymmetry in the Permanent Price Impact of Block Purchases and Sales: Theory and Empirical Evidence
Author(s) -
Frino Alex,
Mollica Vito,
Romano Maria Grazia,
Zhou Zeyang
Publication year - 2017
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21822
Subject(s) - futures contract , volatility (finance) , economics , empirical evidence , financial economics , monetary economics , futures market , information asymmetry , index (typography) , econometrics , microeconomics , epistemology , philosophy , world wide web , computer science
Previous research has identified that the information effects of buyer‐initiated trades are greater than seller‐initiated trades. We develop a theoretical model that predicts block purchases are relatively more informed in bear markets and block sales are relatively more informed in bull markets. Using a sample of large trades executed in the E‐mini S&P 500 index futures and SPDR S&P 500 exchange traded fund, we find evidence consistent with our theoretical model. Our results are robust to volatility and macro‐economic news announcements categorized as bullish or bearish. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 37:359–373, 2017