Download this Paper Open PDF in Browser

Intra-Day Characteristics of Stock Price Crashes

33 Pages Posted: 9 Jan 2009  

Manuel Ammann

University of St. Gallen - School of Finance

Stephan Kessler

Universit├Ąt St. Gallen - Swiss Institute of Banking and Finance

Date Written: July 1, 2008

Abstract

This article presents the first detailed analysis of the intra-day characteristics of idiosyncratic stock price crashes. The analysis focuses on the impact of large crashes in single stocks on their intra-day returns and liquidity in the US market. Furthermore, optimal intra-daily behavior during crashes is studied. Crashes are found to happen rather quickly, usually during a time interval of a few hours. In general, a strong increase in trading activity is observed during a crash, indicating that investors are able to sell their stocks even in distressed markets. The level of liquidity change is linked to the size of the crash. However, there is little evidence that the large sales volume during a crash drives down stock prices. After a stock price crash a significant momentum effect is found for several hours. Stock price crashes appear to reduce information asymmetries.

Keywords: Idiosyncratic crash, market microstructure, intra-day analysis, liquidity, risk

JEL Classification: G11, G14, G32, G33

Suggested Citation

Ammann, Manuel and Kessler, Stephan, Intra-Day Characteristics of Stock Price Crashes (July 1, 2008). Available at SSRN: https://ssrn.com/abstract=1324705 or http://dx.doi.org/10.2139/ssrn.1324705

Manuel Ammann (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Stephan Kessler

Universit├Ąt St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstr. 52
CH-9000 St.Gallen
Switzerland

Paper statistics

Downloads
278
Rank
91,077
Abstract Views
1,344