Abstract: | This article develops a theoretical model to explain the permanentprice impact asymmetry between buyer- and seller-initiated blocktrades (the permanent price impact of buys is larger than thatof sells). The model shows how the trading strategy of institutionalportfolio managers creates a difference between the informationcontent of buys and sells. The main implication of the modelis that the history of price performance influences the asymmetry:the longer the run-up in a stock's price, the less the asymmetry.The intensity of institutional trading and the frequency ofinformation events affect the asymmetry differently dependingon recent price performance. |