Assessing the effect of flash crashes on the U.S. Stock Market
Teklevchiev, Gilbert (2022)
Pro gradu -tutkielma
2022
School of Business and Management, Kauppatieteet
Kaikki oikeudet pidätetään.
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2022062048004
https://urn.fi/URN:NBN:fi-fe2022062048004
Tiivistelmä
In recent years, different stock markets have observed increased numbers of sudden and sharp fluctuations in their trading systems. Remarkably, after the flash crash of May 06, 2010, the US stock market was the first to address this new phenomenon publicly. Since then, the US stock market has experienced multiple flash crashes that have led to the re-restructuring of the trading system and the adoption of new regulations.
This study examines the US stock market caps' reaction to flash crashers. The study centers on the flash crash of May 06, 2010, August 24, 2015, and February 05, 2018. The study provides an overview of the market cap volatility and distress observed after each flash crash. The study adopted the range-based volatility estimation model Yang-and-Zhang (2000) to estimate the daily historical volatility for the VIX index, the Large-Cap, the Mid-Cap, and the Small-Cap stock index on each evaluated year for a period of 252 trading dates.
After calculating the Yang-and-Zhang volatility estimation model, the study conducts different statistical analyses and hypothesis tests. The study finds that the US stock market cap indexes exhibit significant volatility fluctuations due to flash crashes. Similarly, the study observes that flash crashes cause considerable distress in the US stock market. Conclusively, the study finds that the Large-Cap stock index tends to be more susceptible to flash-crash than the Mid-Cap and the Small-Cap stock indexes.
This study examines the US stock market caps' reaction to flash crashers. The study centers on the flash crash of May 06, 2010, August 24, 2015, and February 05, 2018. The study provides an overview of the market cap volatility and distress observed after each flash crash. The study adopted the range-based volatility estimation model Yang-and-Zhang (2000) to estimate the daily historical volatility for the VIX index, the Large-Cap, the Mid-Cap, and the Small-Cap stock index on each evaluated year for a period of 252 trading dates.
After calculating the Yang-and-Zhang volatility estimation model, the study conducts different statistical analyses and hypothesis tests. The study finds that the US stock market cap indexes exhibit significant volatility fluctuations due to flash crashes. Similarly, the study observes that flash crashes cause considerable distress in the US stock market. Conclusively, the study finds that the Large-Cap stock index tends to be more susceptible to flash-crash than the Mid-Cap and the Small-Cap stock indexes.