VPIN and the Flash Crash: A Comment
8 Pages Posted: 18 May 2012 Last revised: 29 Sep 2013
Date Written: May 17, 2012
Recently Andersen and Bondarenko posted a paper on SSRN with the title “VPIN and the Flash Crash” which is essentially a comment on our earlier work on the measure of order toxicity, VPIN. Andersen and Bondarenko dispute our empirical findings and argue that VPIN essentially doesn’t work. We appreciate the interest in our work, but feel strongly that they are confused by what we do and are incorrect in their claims and findings. Far from “replicating” our results, AB attack a methodology we do not advocate, an analysis we never performed, and conclusions we did not draw. We believe it useful, therefore, to set the record straight.
Keywords: Flash crash, liquidity, flow toxicity, market microstructure, probability of informed trading, VPIN
JEL Classification: C02, D52, D53, G14
Suggested Citation: Suggested Citation