Equity trading costs and the price effects of "shopping the block"
Abstract
This dissertation examines the dissemination of information in stock prices around large block trades. It uses a unique new data set on investors' expressed desires to trade large blocks of U.S. equities to examine the extent to which the market learns of impending block trades, and the relation between trade characteristics and the process known as "shopping the block." Empirical analysis of the duration of the period over which block trades are arranged finds that the duration of a trade increases with trade size. The process of shopping the block affects stock prices prior to seller-initiated trades. As a result, using the prior transaction price or prior day's closing price to calculate the impact of a trade may understate the trade's true permanent price impact, and thus understate the cost of trading large blocks.
Subject Area
Finance|Business community
Recommended Citation
Nelling, Edward Francis, "Equity trading costs and the price effects of "shopping the block"" (1993). Dissertations available from ProQuest. AAI9331822.
https://repository.upenn.edu/dissertations/AAI9331822