Asymmetry in the permanent price impact of block purchases and sales: theory and empirical evidence
Previous research has identified that the information effects of buyer-initiated trades are greater than seller-initiated trades. We develop a theoretical model that predicts block purchases are relatively more informed in bear markets and block sales are relatively more informed in bull markets. Using a sample of large trades executed in the E-mini S&P 500 index futures and SPDR S&P 500 exchange traded fund, we find evidence consistent with our theoretical model. Our results are robust to volatility and macro-economic news announcements categorized as bullish or bearish.