Arbeitspapier
Crowded trades, market clustering, and price instability
Crowded trades by similarly trading peers influence the dynamics of asset prices, possibly creating systemic risk. We propose a market clustering measure using granular trading data. For each stock the clustering measure captures the degree of trading overlap among any two investors in that stock. We investigate the effect of crowded trades on stock price stability and show that market clustering has a causal effect on the properties of the tails of the stock return distribution, particularly the positive tail, even after controlling for commonly considered risk drivers. Reduced investor pool diversity could thus negatively affect stock price stability.
- Language
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Englisch
- Bibliographic citation
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Series: Tinbergen Institute Discussion Paper ; No. TI 2020-007/II
- Classification
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Wirtschaft
Information and Market Efficiency; Event Studies; Insider Trading
Financial Institutions and Services: General
- Subject
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crowded trading
tail-risk
financial stability
- Event
-
Geistige Schöpfung
- (who)
-
van Kralingen, Marc
Garlaschelli, Diego
Scholtus, Karolina
van Lelyveld, Iman
- Event
-
Veröffentlichung
- (who)
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Tinbergen Institute
- (where)
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Amsterdam and Rotterdam
- (when)
-
2020
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- van Kralingen, Marc
- Garlaschelli, Diego
- Scholtus, Karolina
- van Lelyveld, Iman
- Tinbergen Institute
Time of origin
- 2020
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Competing for Dark Trades
Crowded Trades: An Overlooked Systemic Risk for Central Clearing Counterparties
Long-term investing under uncertain parameter instability
Social (In)Stability, Distributive Conflicts, and Investment in Poor and Rich Economies
Price Competition on Graphs
Price-setting Power versus Private Information
Price Differentiation and Discrimination in Transport Networks
Measures of Contributions to Price Discovery: A Comparison
Balancing the Bids, Solutions for Unit Price Auctions
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