Herding and Flash Events: Evidence From the 2010 Flash Crash

9 Pages Posted: 2 Nov 2018 Last revised: 28 Dec 2018

See all articles by Riza Demirer

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance; Economic Research Forum (ERF)

Karyl Leggio

Loyola University Maryland

Donald D. Lien

University of Texas at San Antonio - College of Business - Department of Economics

Date Written: December 26, 2018

Abstract

Using intraday data on individual stocks included in the S&P 500 index, we present evidence of herd formation over the duration and aftermath of the Flash Crash on May 6, 2010, while no evidence of herding is observed preceding the event. The findings establish a clear link between herding among market participants and flash events that can drive sudden price fluctuations and underscore the importance of monitoring herd activity, particularly in the case of automated markets.

Keywords: Herding, Flash Crash

JEL Classification: G14, G15

Suggested Citation

Demirer, Riza and Leggio, Karyl and Lien, Donald, Herding and Flash Events: Evidence From the 2010 Flash Crash (December 26, 2018). Finance Research Letters, 2019. Available at SSRN: https://ssrn.com/abstract=3263881 or http://dx.doi.org/10.2139/ssrn.3263881

Riza Demirer

Southern Illinois University Edwardsville - Department of Economics & Finance ( email )

Department of Economics & Finance
Alumni Hall 3144
Edwardsville, IL 62026-1102
United States
(618) 650-2939 (Phone)
(618) 650-3047 (Fax)

HOME PAGE: http://www.siue.edu/~rdemire/

Economic Research Forum (ERF)

21 Al-Sad Al-Aaly St.
(P.O. Box: 12311)
Cairo, Cairo
Egypt

HOME PAGE: http://erf.org.eg/affiliates/riza-demirer-3/

Karyl Leggio (Contact Author)

Loyola University Maryland ( email )

4501 North Charles Street
Baltimore, MD 21210-2699
United States
4106172097 (Phone)

Donald Lien

University of Texas at San Antonio - College of Business - Department of Economics ( email )

6900 North Loop 1604 West
San Antonio, TX 78249
United States
210-458-4313 (Phone)
210-458-4308 (Fax)

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