The Asymmetry of Price Behavior around Buy and Sell Trades: New Evidence on the Stock Exchange of Thailand

Publication Type

Conference Paper

Publication Date



This study examines the price behavior associated with buy and sell trades of 71 stocks actively traded on the Stock Exchange of Thailand from March 2000 to June 2002. During this time, Thai market experienced three distinct conditions: bullish, bearish, and neutral. The results show that the asymmetry of permanent and temporary price impacts between buy trades and sell trades is determined primarily by market conditions. Moreover, the study finds that the asymmetry of price behavior in bear market conditions is opposite to the findings in previous studies. In other words, an increase in price induced by a buy trade is temporary, but a decline in price following a sell trade is permanent or leads to further price drops. These results still hold after controlling for differences in trade and firm characteristics. Our results invalidate the proposition that buy trades are more informative than sell trades. However, for large trades, it appears that the permanent price impact of buys is always larger than the price impact of sells, regardless of market conditions. This finding is consistent with the well-known hypothesis that large buys are better informed than large sells, although the buy-sell asymmetry of permanent price impact is lower in bear markets than in bull markets. This study concludes that for large trades the buy-sell asymmetry of permanent price impact is consistent with a hypothesis that buys are more informative than sells and a hypothesis that buy-sell asymmetry is influenced by market conditions. Both hypotheses appear to explain the asymmetric response of permanent price effects to large buys and large sells. Finally, the empirical results do not support the hypothesis that a stock’s history of price performance explains the buysell asymmetry of permanent price impact. On the contrary, the results appear to confirm our hypothesis that permanent price impact asymmetry is driven by contemporaneous market condition.


Finance and Financial Management | Portfolio and Security Analysis

Research Areas



Financial Management Association International Conference, 17-20 October 2007, Orlando

City or Country

Orlando, FL, USA

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