PRICE IMPLICATIONS OF BLOCK
| dc.contributor.author | Kithinji, Kinya | |
| dc.date.accessioned | 2011-05-10T12:43:50Z | |
| dc.date.available | 2011-05-10T12:43:50Z | |
| dc.date.issued | 2011-05-10 | |
| dc.description | MBA - WBS | en_US |
| dc.description.abstract | The purpose of this research was to investigate the impact of block transactions on security prices and on the price discovery process arising from such trades, with emphasis on actively traded JSE-listed securities. The focus was on the stock market’s reaction immediately before and after the block trade. First, the researcher investigated whether, on average, block trades leads to excess returns and, secondly, whether the resulting price impact is permanent or temporary. The research differentiated between buyer- and seller-initiated block trades and analysed these trades separately. The findings indicate that there are asymmetries between the two types of trades, specifically with respect to the frequency of occurrence and the pricing, with seller-initiated trades being more prominent in all aspects. The prevailing market conditions seem to account for the price asymmetry between sellerand buyer-initiated trades while the market trading structure explains the total price impact. Using well established statistical techniques, the key findings reveal that while block trades have an impact on the prices of the underlying securities, the total impact is predominately temporary as share prices revert back within one to three trades, irrespective of the type of trade. Contrary to expectations, the block size does not have an impact on the total price or on the speed of price re-adjustment. Further, if the market has information about a pending block trade, there is insufficient evidence that they react to such information prior to the execution of the block trade. The research concludes that block trades do not lead to an adverse effect on security prices of actively traded shares. This will be of interest to firms whose shares are prone to being traded in blocks, equity traders, policy makers and regulators. | en_US |
| dc.identifier.uri | http://hdl.handle.net/10539/9709 | |
| dc.language.iso | en | en_US |
| dc.subject | Share transactions | en_US |
| dc.subject | Johannesburg Securities Exchange | en_US |
| dc.title | PRICE IMPLICATIONS OF BLOCK | en_US |
| dc.type | Thesis | en_US |