Recovery from fast crashes: Role of mutual funds

Ravi Jagannathan, Loriana Pelizzon (), Ernst Schaumburg, Mila Getmansky Sherman and Darya Yuferova

No 227, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: We study the role mutual funds play in the recovery from fast intraday crashes based on data from the National Stock Exchange of India for a single large stock. During normal times, trading activity and liquidity provision by mutual funds is negligible compared to other traders at around 4% of overall activity. Nevertheless, for the two intraday marketwide crashes in our sample, price recovery took place only after mutual funds moved in. Market stability may require the presence of well-capitalized standby liquidity providers for recovery from fast crashes.

Keywords: Liquidity Provision; Market Fragility; Flash Crash; Slow-Moving Capital (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2021, Revised 2021
New Economics Papers: this item is included in nep-fmk and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Recovery from fast crashes: Role of mutual funds (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:227

DOI: 10.2139/ssrn.3239440

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