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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 1: Econophysics

SOE 1.2: Vortrag

Montag, 17. März 2025, 15:30–15:45, H45

The Mechanism and Impact of Ultra Extreme Fast Events on Stock Markets — •Luca Henrichs, Anton J. Heckens, and Thomas Guhr — Universität Duisburg-Essen, Lotharstr. 1, 47048 Duisburg

Recent years have seen much discussion about the mechanism of Ultra Extreme Fast Events (UEEs), which are rapid and strong price changes. In particular, the influence of algorithmic trading or high-frequency traders (HFTs) was studied [1] [2]. HFTs are computer programs that can react faster to UEEs than humans. However, the rapid trading of HFTs would make it extremely difficult to intervene to stabilize a market. Hence, a deeper understanding of UEEs is called for.

In our study, we compare various characteristics of UEEs for the years 2007, 2008, 2014 and 2021. In comparison to the study [1], we show that various statistical properties of UEEs are robust over the years. The recovery rate after a UEE is of particular interest here and indicates that certain underlying mechanisms changed only very little. In contrast to [1], which says that human traders with large market orders generate UEEs, we concluded that liquidity plays a major role in the emergence of UEEs, independent of HFTs and human traders.

[1] Tobias Braun, Jonas A. Fiegen, Daniel C. Wagner, Sebastian M. Krause, Thomas Guhr. Impact and recovery process of mini flash crashes: An empirical study PLoS ONE 13, e0196920 (2018).

[2] Johnson N, Zhao G, Hunsader E, Qi H, Meng J, et al. Abrupt rise of new machine ecology beyond human response time. Scientific reports. 2013; 3:2627. PMID: 24022120

Keywords: Complex Systems; Nonstationarity; ltra Extreme Fast Events; High-Frequency Traders; Recovery Rate