Trading Behavior During Stock Market Downturns: The Dow, 1915 - 2004

Pierre Siklos and Martin T. Bohl

No 2005,7, Working Paper Series from European University Viadrina Frankfurt (Oder), The Postgraduate Research Programme Capital Markets and Finance in the Enlarged Europe

Abstract: Stock markets periodically experience sharp falls with some referred to as outright crashes. The extant literature has generally resorted to survey type evidence to determine the behavior of investors during such episodes. These kind of studies come to the conclusion that fundamentals play little role in explaining sharp stock market downturns as in October 1987. We know of no econometric study that asks whether feedback, momentum or trend chasing type behavior might explain the behavior of large stock market downturns. Resorting to a feedback trader model, we estimate a variety of asymmetric GARCH-type models. Based on daily data on the Dow Jones Industrial Average index since 1915 we find that there is evidence of positive feedback trading during episodes of stock market crashes. Hence, the econometric evidence is broadly consistent with findings based on surveys.

JEL-codes: C22 G14 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/22104/1/p72005.pdf (application/pdf)

Related works:
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:zbw:euvgra:20057

Access Statistics for this paper

More papers in Working Paper Series from European University Viadrina Frankfurt (Oder), The Postgraduate Research Programme Capital Markets and Finance in the Enlarged Europe Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().