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This paper aims to examine the price impact of block trades for FTSE 100 firms.
Abstract
Purpose
This paper aims to examine the price impact of block trades for FTSE 100 firms.
Design/methodology/approach
Using event studies a sample of 1.6 million block purchases and 1.2 million block sales over the time period 1998‐2005 is analysed.
Findings
Once block price effects are estimated using quote returns to eliminate bid‐ask bias, the asymmetry in buyer and seller initiated trades is eliminated.
Research limitations/implications
A possible avenue for future research may be to look at the impact of inflation on the asymmetry between block purchases and sales. This may be an interesting extension to the current study given that inflation appears to be an important determinant of the equity premium in international stock markets.
Practical implications
The empirical results suggest that market liquidity is one of the factors that is driving the asymmetry between block purchases and sales on the London Stock Exchange. The paper is of interest to academics and practitioners who study and invest in block trades.
Originality/value
This is the first study of the UK stock market to encapsulate bid‐ask biases in block trades.
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Keywords
The purpose of this paper is to test if the empirical relationship between the size of trades and market liquidity can be pooled across different block sizes on the London Stock…
Abstract
Purpose
The purpose of this paper is to test if the empirical relationship between the size of trades and market liquidity can be pooled across different block sizes on the London Stock Exchange (LSE).
Design/methodology/approach
The authors use pooling and non-pooling econometric tests in a panel framework.
Findings
When the authors differentiate between various block sizes, the authors find that for trades in excess of 50,000 shares, there is a positive association between the size of the trade and the bid-ask spread, due to a lack of liquidity in the financial market. The results provide strong evidence that an upstairs market may be required in order to provide liquidity for large block trades on the LSE.
Originality/value
This is the first study to directly test if the LSE requires an upstairs market to provide liquidity for large trade transactions.
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The purpose of this paper is to test and model non-linearities in block price deviations when they are executed outside the bid-ask quotes. The author conducts an empirical…
Abstract
Purpose
The purpose of this paper is to test and model non-linearities in block price deviations when they are executed outside the bid-ask quotes. The author conducts an empirical analysis on 662,312 transactions that were traded outside the bid-ask quotes in 2014 on the London Stock Exchange.
Design/methodology/approach
The tests reject the linearity hypothesis and the paper shows that the exponential smooth transition autoregressive model is capable of capturing the non-linear behaviour of block price misalignments.
Findings
The findings imply that when the deviation of block prices from their quoted value is small (large), trading will occur slowly (rapidly) to restore equilibrium, suggesting that trading costs eliminate continuous trading and that the block trade market is efficient.
Originality/value
The purpose of this paper is to re-model block price deviations from the bid-ask quotes. The major contribution is that the paper presents new empirical evidence, which explicitly allows for the possibility that block price misalignments from the bid-ask quotes can be characterized by a non-linear mean reverting process. The author demonstrates that the presence of transaction costs induces non-linear adjustments of block trade prices.
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The purpose of this paper is to investigate how block trading and asymmetric information contribute to the firm-specific information measured by the stock return synchronicity…
Abstract
Purpose
The purpose of this paper is to investigate how block trading and asymmetric information contribute to the firm-specific information measured by the stock return synchronicity. Based on China stock market which is dominated by individual investors, this study focus on whether traders of block trading, which are usually institutional investors, are “information trader.”
Design/methodology/approach
Based on the high frequency data, the paper constructs two measures of information asymmetry, intraday measure and inter-day measure. Then the paper constructs a multiple regression model and examine how block trading and information asymmetry contribute to the firm-specific information measured by the stock return synchronicity.
Findings
The results show that: on the one hand, block trading transmits more firm-specific information, and can reduce the synchronicity; on the other hand, when the degree of information asymmetry is higher, block trading contains more firm-specific information and has a stronger effect on synchronicity. The effect of information asymmetry specifically displays as: block trading during the first half-hour of the trading day has a stronger effect on synchronicity; and block trading occurred in the days with publicly announced trading information has greater impact on synchronicity.
Practical implications
The conclusions have important practical implications: for market regulators, monitoring for block trading can improve the recognition and prevention of insider trading; for individual investors, especially the risk aversion investors, recognition of intraday and inter-day information asymmetry is beneficial for them to avoid the risk of asymmetric information.
Originality/value
First, the domestic and foreign research mostly concentrated impact of block trading on stock prices. However, reasons of stock price changes include the information effect and non-information effect, this paper selects stock return synchronicity as firm-specific information measure, and mainly focus on the information effect of block trading. Second, based on the high frequency data, the paper constructs two measures of information asymmetry, intraday measure and inter-day measure. Compared with general measure of information asymmetry, such as firm size, earnings quality, the two measures based on high frequency data are more precisely.
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This paper aims to investigate pre-disclosure information leakage by block traders and market reactions to disclosures of off-hours block trading compared to off-market trading.
Abstract
Purpose
This paper aims to investigate pre-disclosure information leakage by block traders and market reactions to disclosures of off-hours block trading compared to off-market trading.
Design/methodology/approach
Stock responses were analyzed based on timely disclosures regarding Korean firms’ decisions to dispose of their own shares to improve their financial structures.
Findings
The results showed that pre-disclosure abnormal returns were generated in off-hours block trading. In contrast, on disclosure days, the returns for off-hours block trading were significantly lower than those for off-market trading. It was consistent with prior studies, indicating that block traders were related to information leakage and caused moral hazard problems.
Originality/value
The comparison between off-hours block trading and off-market trading provides important insights regarding block traders’ behavior. This study’s findings on the leakage of information from block traders indicate the need for firms to exercise caution when using block traders.
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The Foreign Narcotics Kingpin Designation Act was enacted on 3rd December, 1999, as part of the Intelligence Authorization Act for Fiscal Year 2000. The Kingpin Act calls for the…
Abstract
The Foreign Narcotics Kingpin Designation Act was enacted on 3rd December, 1999, as part of the Intelligence Authorization Act for Fiscal Year 2000. The Kingpin Act calls for the imposition of a series of US economic and financial sanctions — with a worldwide reach — on ‘foreign narcotics traffickers’, their related ‘organisations’, and those ‘foreign persons’ who support their activities, enforced by penalties ranging up to fines of $10m and imprisonment for ten years. In passing this legislation, Congress specifically looked to the example provided by an earlier set of economic sanctions that prohibited dealings with Colombian narco‐traffickers or entities which they controlled, established by the President under the International Emergency Economic Powers Act (IEEPA) and administered by the Treasury Department's Office of Foreign Assets Controls (OFAC). The controls established by the Kingpin Act, and the associated Foreign Narcotics Kingpin Sanctions Regulations (FNKSR), accordingly, are neither a unique nor an isolated programme. Rather, they represent the latest step in the evolution of a series of distinct, but related, economic sanctions programmes administered by OFAC.
Milton Mueller, Brenden Kuerbis and Hadi Asghari
This article aims to quantify the emerging transfer market for internet protocol (IPv4) numbers and provides an initial assessment of factors and policies impacting those…
Abstract
Purpose
This article aims to quantify the emerging transfer market for internet protocol (IPv4) numbers and provides an initial assessment of factors and policies impacting those transactions.
Design/methodology/approach
The research draws on Regional Internet Registry records and conducts basic analysis of stocks, flows and proportions to assess the nature of this emerging market for IP number blocks and explore some of its implications for internet governance.
Findings
There is a thriving and growing market for IPv4 number blocks. The market is improving the efficiency of IPv4 address allocation by moving numbers from unused or under-utilized holders to organizations that need them more. Buyers willingly pay for number blocks they could get for free in order to benefit from more liberal needs assessments and stronger property rights.
Research limitations/implications
Information about prices is not available and some transfers may take place through leasing arrangements, which are not covered by this paper. Future research should continue to investigate the transfer market, including activity skirting or occurring outside the current RIR policy environment.
Practical implications
RIRs should liberalize needs assessments and remove other sources of friction to the transfer market.
Originality/value
No known prior assessment of the transfer market has been conducted. The research has value for policymakers and industry decision makers.
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Alex Frino, Jennifer Kruk and Andrew Lepone
This chapter examines the price impact of large trades in futures markets across 14 stock index futures contracts in 11 different international markets. On the balance, we find…
Abstract
This chapter examines the price impact of large trades in futures markets across 14 stock index futures contracts in 11 different international markets. On the balance, we find that part of the initial price effect of futures trades is temporary. These initial price effects are partially reversed, implying that they incur a liquidity premium; though there is some variation in this finding across markets. We also find strong evidence that large buyer- and seller-initiated trades have positive and negative permanent effects on prices, implying they convey information. We conclude, similar to research based on equities markets, that traders in futures markets are informed.
Ronen Barak and Beni Lauterbach
Purpose – To seek firm-specific determinants of private benefits (PBs) in a concentrated ownership economy and compare the evidence with Barclay and Holderness (1989) findings on…
Abstract
Purpose – To seek firm-specific determinants of private benefits (PBs) in a concentrated ownership economy and compare the evidence with Barclay and Holderness (1989) findings on disperse ownership firms.
Design/methodology/approach – We estimate the PBs of control implicit in 54 large block transactions in Israel, via an elaborated Barclay and Holderness (1989) methodology, and then examine possible determinants of PBs using multivariate regressions.
Findings – Cross-sectional regressions indicate that PBs, as a proportion of firm's market value, decrease with firm's size, leverage, and profitability and increase when an individual or family controls the firm.
Research limitations/implications – Our results reinforce and are even stronger and more significant than Barclay and Holderness (1989) U.S. evidence, possibly because the magnitude of PBs in concentrated ownership economies is much higher than in disperse ownership economies. The main limitation is our reliance on one country (Israel) data only.
Originality/value – We extend Barclay and Holderness (1989) study to a concentrated ownership economy, and document clearer and more significant results on the determinants of the PBs of control.
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Syed Tehseen Jawaid and Abdul Waheed
The purpose of the study is to develop a macroeconometric model for evaluation of trade policies and forecasting of trade performance of Pakistan with different regions or group…
Abstract
Purpose
The purpose of the study is to develop a macroeconometric model for evaluation of trade policies and forecasting of trade performance of Pakistan with different regions or group of countries.
Design/methodology/approach
These regions or group of countries are Organization of Islamic Cooperation, Organization of Economic Cooperation and Development, Association of Southeast Asian Nations, South Asian Association for Regional Cooperation and the rest of the world. A macroeconometric model containing 15 behavioral equations and eight identities.
Findings
Cointegration results suggest that there exist long-run relationships among variables of all behavioral equations. Additionally, results of different policy shocks based on unit value of export (export price), unit value of import (import price), exchange rate, foreign direct investment, interest rate and foreign exchange reserve suggest that the model is useful for economic planning to sustain growth performance of Pakistan.
Originality/value
In this study, the authors develop for the first time ever a macroeconometric model for the evaluation and forecasting of regional trade policy and performance for Pakistan.