Written in Ink
Written in Ink
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Is the Stock Market crashing 2,000 times a year?

This story is really intriguing. Scientist believe the stock market is spiking frequently, in time slices not captured by the typical reporting tools. Basically, the question is, is there a hidden, secondary trading market, or (like in 'The Grifters') is someone manipulating stocks in sub-second crash-recovery cycles to trade on as a type of insider information unavailable to anyone else? This excerpt if referring to some charts in the post on The Atlantic site (I'm really crushing it with the statistical model posts today!):

If you’ve noticed that the number of extreme events spikes around the time of the financial crisis, and the stocks most likely to experience them are bank stocks, you’ll see why the researchers are so interested in this hidden market: This pattern suggests the coupling between extreme market behaviors and global instability—”how machine and human worlds can become entwined across timescales from milliseconds to months”—and is also are seen more often before and after the kinds of “flash crashes” that people actually notice.

Regulators, though, aren’t keeping track of these events. That’s a problem, not just because of any potential forewarning, but also because trading at that speed creates volatility that makes markets less efficient.

“Are these 18,000 lucky breaks for one of the algorithms or 18,000 examples of a new form of inside trading?” Johnson says. “In terms of the information availability, it’s really hard to tell. It’s sort of strange to have that going on and have nobody know.”

Illustration for article titled Is the Stock Market crashing 2,000 times a year?

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