The Chinese Stock Markets on Trial: The Fat Finger Accident of Everbright Securities

Yan Han; Xin Cui; Sihang Meng

doi:10.3868/s070-004-015-0011-5

The Chinese Stock Markets on Trial: The Fat Finger Accident of Everbright Securities

Yan Han^*, Xin Cui, Sihang Meng

^*Corresponding author for this work

University of International Business and Economics

Research output: Contribution to journal › Article › peer-review

Abstract

Everbright Securities Ltd. erroneously submitted huge quantities of buy orders on SSE180 constituent stocks from 11:05 through 11:07 on 16 August 2013. This fat finger accident had a pronounced impact on the Chinese stock markets. This paper uses the accident to study market quality and investorsâ €™ responses. We show that the Chinese stock markets were robust enough to stand the trial, exhibiting deep depths and strong resiliency. However, the markets performed poorly in terms of aggregating information because there were large price swings after the erroneous orders were executed. Moreover, investors quickly change their beliefs as to the reasons to the dramatic price jumps, consistent with information cascade theory.

Original language	English
Pages (from-to)	243-267
Number of pages	25
Journal	Frontiers of Business Research in China
Volume	9
Issue number	2
DOIs	https://doi.org/10.3868/s070-004-015-0011-5
Publication status	Published - 19 Aug 2015

Keywords

Everbright fat finger accident
Information cascade
Market efficiency
Market quality

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10.3868/s070-004-015-0011-5

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title = "The Chinese Stock Markets on Trial: The Fat Finger Accident of Everbright Securities",

abstract = "Everbright Securities Ltd. erroneously submitted huge quantities of buy orders on SSE180 constituent stocks from 11:05 through 11:07 on 16 August 2013. This fat finger accident had a pronounced impact on the Chinese stock markets. This paper uses the accident to study market quality and investors{\^a} €{\texttrademark} responses. We show that the Chinese stock markets were robust enough to stand the trial, exhibiting deep depths and strong resiliency. However, the markets performed poorly in terms of aggregating information because there were large price swings after the erroneous orders were executed. Moreover, investors quickly change their beliefs as to the reasons to the dramatic price jumps, consistent with information cascade theory.",

keywords = "Everbright fat finger accident, Information cascade, Market efficiency, Market quality",

author = "Yan Han and Xin Cui and Sihang Meng",

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T1 - The Chinese Stock Markets on Trial

T2 - The Fat Finger Accident of Everbright Securities

AU - Han, Yan

AU - Cui, Xin

AU - Meng, Sihang

PY - 2015/8/19

Y1 - 2015/8/19

N2 - Everbright Securities Ltd. erroneously submitted huge quantities of buy orders on SSE180 constituent stocks from 11:05 through 11:07 on 16 August 2013. This fat finger accident had a pronounced impact on the Chinese stock markets. This paper uses the accident to study market quality and investorsâ €™ responses. We show that the Chinese stock markets were robust enough to stand the trial, exhibiting deep depths and strong resiliency. However, the markets performed poorly in terms of aggregating information because there were large price swings after the erroneous orders were executed. Moreover, investors quickly change their beliefs as to the reasons to the dramatic price jumps, consistent with information cascade theory.

AB - Everbright Securities Ltd. erroneously submitted huge quantities of buy orders on SSE180 constituent stocks from 11:05 through 11:07 on 16 August 2013. This fat finger accident had a pronounced impact on the Chinese stock markets. This paper uses the accident to study market quality and investorsâ €™ responses. We show that the Chinese stock markets were robust enough to stand the trial, exhibiting deep depths and strong resiliency. However, the markets performed poorly in terms of aggregating information because there were large price swings after the erroneous orders were executed. Moreover, investors quickly change their beliefs as to the reasons to the dramatic price jumps, consistent with information cascade theory.

KW - Everbright fat finger accident

KW - Information cascade

KW - Market efficiency

KW - Market quality

UR - https://www.scopus.com/pages/publications/84941008105

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DO - 10.3868/s070-004-015-0011-5

M3 - Article

AN - SCOPUS:84941008105

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VL - 9

SP - 243

EP - 267

JO - Frontiers of Business Research in China

JF - Frontiers of Business Research in China

IS - 2

ER -

The Chinese Stock Markets on Trial: The Fat Finger Accident of Everbright Securities

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Keywords

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