Jagannathan, Ravi Pelizzon, Loriana Schaumburg, Ernst Getmansky Sherman, Mila Yuferova, Darya
Year of Publication:
SAFE Working Paper No. 227
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.
Liquidity Provision Market Fragility Flash Crash Slow-Moving Capital