The Empirical Studies Of The Impacts Of Block Trading On Stock Price

Block trading is a special trading mechanism of the securities market and a supplement to ordinary trading mechanism; it is also an important part of the market microstructure theory. One reason for the necessity of block trading system, trading mechanisms and trading system is that block trading brings huge market impacts and tremendous volatilities to the market. These articles hopes to rich empirical studies by studying the impact of block trading on the secondary market stock price; and on the other hand, provide a reference for the development and improvement of China’s block trading system. The major research method of this paper is the event study method and multiple regression analysis. This paper shows that:the buyer-initiated and the seller-initiated block trading causes asymmetric price effect. Different discount or premium and volume cause different price shocks. The reflections of block trading in Main board, GEB and MSE board are different.This paper also finds the factors that influence how much the block trading impacted the stock price. We find CAAR before the block trading yields a positive correlation to buyer-initiated block trading, MSE board, GEB and3day’s average index return. As to the permanent and the temporary impact, the discount or premium rates and price shocks are positively related; the relative volume and price shocks are negatively correlated; and the influence is temporary. Temporary impact and permanent impact of the three board also different in both direction and degree caused by discount rate and volume. Finally, the paper makes policy recommendations to improve the block trading mechanisms and strengthen effective block trading market supervision.