Regensburg 2019 – wissenschaftliches Programm

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 3: Financial Markets and Risk Management I

SOE 3.2: Vortrag

Montag, 1. April 2019, 11:30–12:00, H17

Impact and recovery of mini flash crashesTobias Braun, Jonas A. Fiegen, Daniel C. Wagner, •Sebastian M. Krause, and Thomas Guhr — University of Duisburg Essen, Duisburg, Germany

Flash crashes with large price changes in short times imply large risks for investors. An example is the flash crash of May 6 in 2010 which produced one of the largest ever intraday point decline of the Dow Jones. There is also a large number of less drastic mini flash crashes, usually in only one stock at a time. The reasons of flash crashes are discussed controversially. Explanations span from large trades over market manipulation to feedbacks in trading algorithms. We have a closer look on the interplay between mini flash crashes and high frequency trading by using order flow data during the financial crisis [1]. We find that often single market orders dominate the flash crashes, which are therefore not triggered by algorithmic feedbacks. Furthermore we find that the price is often restored to levels close to the price before the flash crash.

[1] T. Braun, J.A. Fiegen, D.C. Wagner, S.M. Krause, T. Guhr, Impact and recovery process of mini flash crashes: An empirical study. PLoS ONE 13 (2018) e0196920.

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