Please use this identifier to cite or link to this item:
Title: Price impact of block trades in the Saudi stock market
Authors: Alzahranai, AA
Gregoriou, A
Hudson, R
Kyriacou, K
Keywords: Price impact;Block trades;Saudi stock market;Information asymmetry and liquidity
Issue Date: 2010
Publisher: Brunel University
Citation: Economics and Finance Working Paper, Brunel University, 10-16
Abstract: This paper examines the price impact of block trades for the 124 companies that comprise all listed firms in the Saudi stock market (SSM). We use high frequency intraday data (one minute intervals) for the period 2005-2008 to provide out of sample evidence of the determinants of price impact. We find an asymmetric price impact of 0.5% for block purchases and -0.38% for block sales. We document a price continuation post block trades and a price reversal after block sales. Sellers of block trades in the Saudi market pay higher liquidity premiums than buyers of block trades. However, on average, the price effect of a block trade is small and short-lived suggesting that resiliency is high in the market. Moreover, we find a direct relationship between the size of the trades and the level of information asymmetry in the market. Despite the structural differences of the SSM, the intraday pattern of price impacts is similar to patterns documented in other markets, namely an inverse J-shaped pattern. Finally, sophisticated traders can gain abnormal profits in the SSM through “free riding”, a trader can benefit from the overreaction before the block trade and price reversal after the block trade.
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

Files in This Item:
File Description SizeFormat 
1016[1].pdf305.66 kBAdobe PDFView/Open

Items in BURA are protected by copyright, with all rights reserved, unless otherwise indicated.