| The block trade is an order for a very large volume of securities, and has to be confirmed by the block house after both sides made the deal. As a useful addition to the competing system, block trade, which involved with large sum of money and special exchange participants, has attracted lots of attention from investors. The information contained in block trades would affect the secondary market stock price, which is now a hot research point in abroad academic institutions. Chinese block trade market has made a rapidly increase since2008. From2008to2012, we have16963block trades and the turnover in2008is15.5times of it in2007, in2012the turnover is1291.5hundred million and is53.6times of it in2007. The turnover of block trades has an annual average of170.08%in ten years. In abroad, they set up the block trading system to meet the needs of institutional investors, in our country, the fast increase has a tight relationships with the development of institutional investors. Till the end of2012, we have3539institutional investors and they hold49.67%of circulation market value in China. While China’s block trade market and institutional investors are developing so fast, it’s very necessary to have a deep research into it.In block trading market, due to the large number of stock quantities and amount of money sold by the seller as well as high demand of instantaneity of liquidity, sellers of block trading would like to offer some discounts to make a deal. In nature, the discounts are price compensation made by the sellers to the buyers for the instantaneity of liquidity. Therefore, in block trading, the final transaction price is usually lower than that of stocks in secondary market; namely a deal at discount. But according to the actual data of block trading from2008-2012, at least4%of block trading were made at a premium each year, among which, the highest premium rate reached22%. Wherein, the premium deal in2008even account for22%. Premium block trade, as a special phenomenon in block trade market deserves our research on the financial fact behind it. In point of the logic behind premium block trade, given that the participant of block trade is information superiority, who is more sensitive and has a stronger insight. Their transaction behavior ought to contain more information. To some extent, their participation of block trade reflects the opinion of "smart money’ Thus, when high premium block trade was made by them, from the rational point, it’s possible that on the base of self-information advantage, they make a prediction that the stock will have a better market performance in the future. Meanwhile, current price of secondary market does not reflect beneficial good news for the stock from both information aspect and basic aspect. That is to say, the buyer of block trade is likely to launch the deal on the basis of private information. At that time, if the investor of secondary market buy in and hold the stocks after premium block trade, then it will be a high probability event to bring excess earnings for the investors by those stocks in the future. Moreover, in different market environments, the investors hold different attitudes towards investment. Therefore, the information of investors contained in his buying and selling conduct differs in bear market and bull market. Thus, we have to distinguish the entire market environment in actual research.To verify this conjecture, this paper studied it on two levels. The first level is to study that whether the premium block trades are initiated by private information. In this level, we reach our conclusion through the following way:we firstly divide the data into four samples according to the entire market environment and the premium rate, then we calculate four samples’average cumulative abnormal return whose standard day is t0and test its significance in short-term (t5, t8) and medium (t60, t90) after premium block trade day (t0), we also test the significance in the differences of the average cumulative abnormal return between different samples. We start the second level of study only after the question in first level been proved. In the second level, we have to answer "could investors in the secondary market make excess return if they buy in and hold the corresponding stocks after premium block trade". In this level, we reach our answer through the following way:we calculate samples" average cumulative abnormal return whose standard day is tl and test its significance in short-term (t6, t9) and medium (t61, t91) and test the significance in the differences of the average cumulative abnormal return between different samples. The empirical results are as follows:Firstly, information contained in premium block trades differs in different market environment. In the bull market, the stocks’mid-term price performance are significantly outperform the market average performance at the95%confidence level regardless of the level of premium rates. This shows that in a bull market environment, the premium block trades accurately reflect the participants in it do have more information which have not been reflected in current secondary market price. However in bear market environment, despite the existence of excess return in the medium term, but it is not significant at the95%confidence level regardless of the level of premium rates. This shows that the bear market environment, although the bulk of trading at a premium, but it could not verify that the participants in block trades have more information. Secondly, the amount of information contained in block trades of different premium levels are different. In a bull market environment, the underlying stock price performance with high premium rate in the mid-term is better than that with low premium rate. This shows that in a bull market environment, the higher the premium rate, the stronger the bullish buy-side’s confidence in the future of the stock price performance which is based on his private information. Thirdly, the short-term price performance of the underlying stock in premium bulk trade is inconsistent with its medium-term price performance. For the samples of bull market which have passed the significance test, regardless of the level of the premium, the short-term price performance of the underlying stock in premium bulk trade does not significantly exceed the market price performance, but in the medium term, it significantly outperform the market. This also confirms the premium large transactions in a way indeed contain private information. Because the effectiveness of China’s market is still very low, price could not immediately response to the information, if private information is fundamental, then the stock price volatility from the impact of information is more likely the mid-term volatility. Fourthly, the bull market environment, investors in the secondary market cannot achieve significant excess return in the short term, but could get close to10%average cumulative abnormal return in mid-term, if they buy in and hold the corresponding stocks after premium block trade day. However, the average cumulative abnormal return of the high premium block-trade stocks would not show significantly higher than the low premium block-trade stocks.In this paper, the overall architecture of the specific as follows:The first chapter is an introduction of this article, mainly expounds the research background and significance, also defines the research content, introduces the new points and the structure of full paper.The second chapter is an overview for block trade system, mainly introduced the designing goal of block trading system and compared the block trading system at home and abroad.The third chapter is for literature review and comments, mainly reviewed research results related block trading at home and abroad and summarized them. Looked from the domestic and foreign research literature, block trades related research in abroad is abundant, mainly concentrated in the block trading system, the trading price and the economic consequences of block trades. And domestic related research is relatively less, after2008the related research is much less, so this paper can enrich the domestic research literature about big deals.Chapter four is about the research design. This chapter embarks from the research purpose, expounds the research idea, research steps, and the models involved, etc.The fifth chapter is about the empirical research and analysis.The sixth chapter is conclusion and prospect, to comb the empirical research conclusion on the basis of summarizing the full text, and put forward related suggestions according to the research conclusion. In addition this chapter put forward the future possible directions of further research on the basis of summarizing the insufficient of this paper. |
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