Price Impact And Liquidity Impact Of Block Trading

Block trading mechanism as a special trading mechanism is very important in themicrostructure theory. There are few empirical researches about block trading in Chinese market.This paper is a start of empirical research about block trading in Chinese market.This paper mainly examines the price impact and liquidity impact of block trading. The sameas international security markets, block trades exhibit price asymmetry in Chinese securitymarket, the block purchases have greater permanent price impact than block sells, and block sellshave greater temporary impact than block purchases. But the price goes up continuously afterblock purchase in Chinese market. Because price manipulation is serious in Chinese market,according to out share' magnitude, this paper divides the block trades into 3 groups. We foundthat there is greater asymmetry and greater permanent price impact in the group with small outshare. Further more, the depth of order book in opposite side enlarge observably before blocktrades, which indicates the depth is not enough in Chinese market.At last, we suppose CSRS (Chinese Securities Regulatory Commission) should put moreeducation on the investors. As the institutional investors grow up quickly in recent years, CSRCshould try to perfect and propagandize the block trading mechanism to satisfy their block trades.