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Chinese block transactions and the market reaction

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  • Bian, Jiangze
  • Wang, Jun
  • Zhang, Ge

Abstract

This paper examines block transactions in the Chinese equity market. We find that most of the block transactions are traded at prices at or below the closing price of the regular continuous auction market, and more than half are traded at or below the lowest price of the day. Consistent with the price pattern indicating that the block transactions are seller-initiated, the overall market reaction is negative. However, we find a different market reaction to block transactions when the buyer is represented by China International Capital Corporation (CICC), the number one investment bank in China which counts many foreign institutional investors as its clients. The positive reaction is consistent with the buyer-certification hypothesis, that is, the fact that some smart institutional buyers enter block trade indicates the buyers' assessment of undervaluation.

Suggested Citation

  • Bian, Jiangze & Wang, Jun & Zhang, Ge, 2012. "Chinese block transactions and the market reaction," China Economic Review, Elsevier, vol. 23(1), pages 181-189.
    • Handle: RePEc:eee:chieco:v:23:y:2012:i:1:p:181-189
    DOI: 10.1016/j.chieco.2011.10.001
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    References listed on IDEAS

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    Cited by:

    1. Sheridan Titman & Chishen Wei. Wei & Bin Zhao, 2021. "Corporate Actions and the Manipulation of Retail Investors in China: An Analysis of Stock Splits," NBER Working Papers 29212, National Bureau of Economic Research, Inc.
    2. Titman, Sheridan & Wei, Chishen & Zhao, Bin, 2022. "Corporate actions and the manipulation of retail investors in China: An analysis of stock splits," Journal of Financial Economics, Elsevier, vol. 145(3), pages 762-787.
    3. Bartłomiej Lisicki, 2021. "Impairment of Assets and Market Reaction during COVID-19 Pandemic on the Example of WSE," Risks, MDPI, vol. 9(10), pages 1-21, October.

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    More about this item

    Keywords

    Block trade; Chinese equity market; Market reaction;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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