• Graduate Program
    • Why study Business Data Science?
    • Program Outline
    • Courses
    • Course Registration
    • Admissions
    • Facilities
  • Research
  • News
  • Events
    • Summer School
      • Summer school
      • Deep Learning
      • Foundations of Machine Learning with Applications in Python
      • Networks in Micro- and Macroeconomics
      • Tinbergen Institute Summer School Program
    • Events Calendar
    • Events archive
    • Conference: Consumer Search and Markets
    • Tinbergen Institute Lectures
  • Summer School
  • Alumni

Menkveld, AlbertJ. and Yueshen, B.Z. (2019). The flash crash: A cautionary tale about highly fragmented markets Management Science, 65(10):4470--4488.

  • Journal
    Management Science

A breakdown of cross-market arbitrage activity could make markets more fragile and result in price crashes. We provide suggestive evidence for this novel channel based on a high-frequency analysis of the most salient crash in recent history: The Flash Crash. We further show that such an event can be extremely costly for a large seller trading in a particular venue as the seller effectively relies on local liquidity supply only. These findings highlight the vulnerability of today’s highly fragmented markets.