Large Bets and Stock Market Crashes

54 Pages Posted: 17 Mar 2012 Last revised: 20 Apr 2019

See all articles by Albert S. Kyle

Albert S. Kyle

University of Maryland

Anna A. Obizhaeva

New Economic School (NES)

Date Written: March 22, 2019


For five stock market crashes, we compare price declines with predictions from market microstructure invariance. During the 1987 crash and the 2008 sales by Société Générale, prices fell by magnitudes similar to predictions from invariance. Larger-than-predicted temporary price declines during 1987 and 2010 flash crashes suggest rapid selling exacerbates transitory price impact. Smaller-than-predicted price declines for the 1929 crash suggest slower selling stabilized prices and less integration made markets more resilient. Quantities sold in the three largest crashes indicate fatter tails or larger variance than the log-normal distribution estimated from portfolio transitions data.

Keywords: finance, market microstructure, invariance, crashes, liquidity, price impact, market depth, systemic risk

JEL Classification: G01, G28, N2

Suggested Citation

Kyle, Albert (Pete) S. and Obizhaeva, Anna A., Large Bets and Stock Market Crashes (March 22, 2019). Available at SSRN: or

Albert (Pete) S. Kyle

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Anna A. Obizhaeva (Contact Author)

New Economic School (NES) ( email )

100A Novaya ul
Moscow, Skolkovo 143026

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