Authors: Halim Dabbou; Olfa Berrich
Addresses: Management de l'innovation et développement durable (LAMIDED), Department of Finance and Accounting, Higher Institute of Management, University of Sousse, Street Abdlaaziz il Behi, BP 763, 4000 Sousse, Tunisia ' Risk Management and Research in Accounting and Finance (RIM-RAF), University of Manouba, Tunisia
Abstract: This paper analyses the impact of block trades (upstairs market) on the Tunisian Stock Exchange from January 2, 2008 to December 31, 2017. We find that the buyer-initiated trades in upstairs market have a positive temporary impact on the main market which confirms the liquidity hypotheses. The Tunisian market is found to react positively after the block initiated by a seller, which is not unexpected. This reaction can be explained by the visibility hypothesis initially developed by Miller (1977) who argues that a volume shock increases the probability that an investor is interested in buying this stock especially when short selling is limited or prohibited. We also think that some Tunisian investors (individual small shareholders) react regardless of the direction of the block transaction, showing a naive behaviour. Our results reject the information hypothesis suggesting that the upstairs brokers have the informational advantage about unexpressed demand and thus the market can absorb large block trades (Grossman, 1992). Then, we highlight the information leakage dealing with block trades according to the position of block brokers (application negotiation or construction pools of counterparts).
Keywords: upstairs market; application; block trades; information leakage; event study; liquidity role.
International Journal of Decision Sciences, Risk and Management, 2020 Vol.9 No.3, pp.168 - 181
Accepted: 25 May 2020
Published online: 28 Dec 2020 *