The Information Content of Institutional Trades on the London Stock Exchange

We construct a unique data set that includes all reported institutional block trades on the London Stock Exchange and analyze the market reaction to buy and sell trades. We find that the type of investors behind the trade and the combination of the trade's size and the trader's resulting l...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 2005-09, Vol.40 (3), p.621-644
Main Authors: Bozcuk, Aslihan, Lasfer, M. Ameziane
Format: Article
Language:English
Subjects:
Business structures
Data analysis
Empirical research
Financial analysis
Financial institutions
Financial research
Information content
Investment strategies
Investors
London Stock Exchange
Market prices
Ownership
Pension funds
Securities trading
Stock exchange
Stock exchanges
Stock prices
Stock shares
Stocks
Trade
Trade finance
Volatility
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Summary:We construct a unique data set that includes all reported institutional block trades on the London Stock Exchange and analyze the market reaction to buy and sell trades. We find that the type of investors behind the trade and the combination of the trade's size and the trader's resulting level of ownership are the major determinants of the information effects and the asymmetry between price impacts of buy and sell trades. In particular, large trades undertaken by fund managers, the most active investors in our sample, have strong information content, while, for the remaining trades, we report limited support for the information and the price impact asymmetry hypotheses. These results hold even after accounting for trade complexity and volatility effects in the regressions.
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109000001897