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V-shapes

Author

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  • Flora, Maria
  • Renò, Roberto

Abstract

We present a methodology for detecting flash crashes by identifying short-term V-shaped price reversals. Our approach, based on drift burst test statistics, aligns with the SEC’s forensic definition of market access rule violations, highlighting its potential as a market surveillance tool. Flash crashes have become more frequent over the past decade and are typically accompanied by high volumes, high volatility, and an increase in odd-lot trades. They are more likely to occur following periods of high volumes, elevated price impact, low volatility, and heightened algorithmic activity.

Suggested Citation

  • Flora, Maria & Renò, Roberto, 2025. "V-shapes," Journal of Banking & Finance, Elsevier, vol. 179(C).
    • Handle: RePEc:eee:jbfina:v:179:y:2025:i:c:s0378426625001414
    DOI: 10.1016/j.jbankfin.2025.107521
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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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