Journal of Financial Markets Vol. 59 2022

Recovery from fast crashes: Role of mutual funds

Ravi Jagannathan^1,2; Loriana Pelizzon^3,4,5,6; Ernst Schaumburg^2,7; Mila Getmansky Sherman⁸; Darya Yuferova⁷

¹ Northwestern University · ² Indian School of Business · ³ Goethe University Frankfurt · ⁴ Ca' Foscari University of Venice · ⁵ Centre for Economic Policy Research · ⁶ Leibniz Institute for Financial Research SAFE · ⁷ Norwegian School of Economics · ⁸ University of Massachusetts Amherst

Abstract

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 market-wide 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.

DOI

10.1016/j.finmar.2021.100646

Volume

59

Pages

100646

Language

en

Sources

crossref openalex

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓