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The Information Content of Institutional Trades on the London Stock Exchange

Published online by Cambridge University Press:  06 April 2009

Aslihan Bozcuk  and
M. Ameziane Lasfer
Aslihan Bozcuk
Affiliation:
aebozcuk@akdeniz.edu.tr, IIBF, Akdeniz University, Dumlupinar Bulvari, Kampus, Antalya, 07070, Turkey
M. Ameziane Lasfer
Affiliation:
m.a.lasfer@city.ac.uk, Cass Business School, City University, 106 Bunhill Row, London EC1Y 8TZ, U.K.
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Abstract

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.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 40 , Issue 3 , September 2005 , pp. 621 - 644
Copyright
Copyright © School of Business Administration, University of Washington 2005

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