Exploring Stock Markets Crashes as Socio-Technical Failures

Lise Arena, Nathalie Oriol and Iryna Veryzhenko
Additional contact information
Iryna Veryzhenko: LIRSA

No 2017-04, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: Based on the integration of two disciplinary fields (MIS and finance), this paper focuses on the micro-foundations of flash crashes, considered as socio-technical failures. A historical analysis allows us to identify four historical periods which each links micro-characteristics (such as speed and volume of traded transactions as well as traders’ technologically-based strategies) to the macro-emergence of extreme phenomena (financial crashes). History is used to calibrate an agent-based model in order to contribute to a better understanding of systemic issues raised by financial institutions and regulatory agencies. Our results contrast with the general opinion that high-frequency traders provoke financial instability because of their use of automated trading based on speed and increasing number of traded transactions. We show that the introduction of heterogeneous high-frequency traders does not necessary amplify the depth of the crash as some of them play a role of liquidity providers and do not follow chartist-based strategies.

Keywords: Algorithmic trading; Financial crashes; Stock-markets history; Agent-based modelling (search for similar items in EconPapers)
Pages: 18 pages
Date: 2017-02
Note: To request an electronic copy of this paper, please email the author at Nathalie.ORIOL@gredeg.cnrs.fr.
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Exploring Stock Markets Crashes as Socio-Technical Failures (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2017-04

Access Statistics for this paper

More papers in GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France Contact information at EDIRC.
Bibliographic data for series maintained by Patrice Bougette ().