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Market Panic On Different Time-Scales

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Executive Summary

Cross-sectional signatures of market panic were recently discussed on daily time scales in, extended here to a study of cross-sectional properties of stocks on intraday time scales. The authors confirm specific intraday patterns of dispersion and kurtosis, and find that the correlation across stocks increases in times of panic yielding a bimodal distribution for the sum of signs of returns. They also find that there is memory in correlations, decaying as a power law with exponent 0.05. During the Flash-Crash of May 6 2010, they find a drastic increase in dispersion in conjunction with increased correlations.

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