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Intra-Day Characteristics of Stock Price Crashes

abstract This article presents the first detailed analysis of the intra-day characteristics of idiosyncratic stock price crashes. The analysis focuses on the impact of large crashes in single stocks on their intra-day returns and liquidity in the US market. Furthermore, optimal intra-daily behavior during crashes is studied. Crashes are found to happen rather quickly, usually during a time interval of a few hours. In general, a strong increase in trading activity is observed during a crash, indicating that investors are able to sell their stocks even in distressed markets. The level of liquidity change is linked to the size of the crash. However, there is little evidence that the large sales volume during a crash drives down stock prices. After a stock price crash a significant momentum effect is found for several hours. Stock price crashes appear to reduce information asymmetries.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324705
   
type journal paper
   
keywords
   
language English
kind of paper journal article
date of appearance 1-9-2009
journal Applied Financial Economics
publisher Routledge
ISSN 0960-3107
volume of journal 19
number of issue 15
page(s) 1239-1255
review double-blind review
   
citation Ammann, M., & Kessler, S. (2009). Intra-Day Characteristics of Stock Price Crashes. Applied Financial Economics, 19(15), 1239-1255.