The Research On Price Effect Of Block Trading On The Stock Market

As a supplement to the general trading mechanism,the block trading system is set up to meet the needs of institutional investors and large-amount equity holders,improve the trading efficiency and reduce the impact of block trading on the secondary market.At present,the proportion of "retail investor" of a-share is declined significantly,and the institutional investor is gradually increased at the same time.This new market feature means that there is an urgent need to adapt the trading model.This change also make the block trading system play a more important role.Investors will put forward higher requirements on the block trading system.In order to improve the system,it is necessary to study the current block trading system.On May 27,2017,the Shanghai Stock Exchange published the rules about stock reduction.The rules restricted the stock reduction of large shareholders through block trading explicitly.The changes above will make block trading take on some new characteristics,so it is meaningful for the academic research.Based on the brand new backgrounds and policy,this paper uses the event study method and multiple regression analysis to examine the price impact of block trading.The main conclusions are as follows.(1)Block trading has significant impact on the stock price.The results show that the price impact of block purchases and block sells is different.The stock price rises obviously after the block purchases in the short term.However it continues to fall after the block sells in the long term.(2)The transactions shows differently before and after the "rules".It can be found that the price impact caused by block trading has been eased after the release of the "rules".(3)Block trading has a greater impact on stock prices in SME board,especially for block sells.(4)Price impact is different between ascent phase and descent phase.In the ascent phase,the secondary market is over-pessimistic about block sells in the long term.On the contrary,in the descent phase,the secondary market is more sensitive to block sells in the short term,and it shows over-optimistic about block purchases in the long term.(5)Through the analysis of multivariate return,it concludes that the discount or premium rates has a positive relation with price effect.(6)If relative volume of a block purchases is larger,the magnitude of price increases will be smaller.If relative volume of a block sells is larger,the magnitude of price decline will be smaller.At last,the paper puts forward some proposals.Continuing to guide and normalize the block trading behavior,especially the stock reduction through block trading system.In the implementation of block trading policy,in order to reduce the price impact,it should consider the difference among the boards.Considering extending the negotiable range of discount premium rates.In order to fixed investors' expected deviation,the block system can try to set the block price based on the intraday closing price.Furthermore,try to increase the popularization of rational investment knowledge.