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Program Trading and Price Movement: Evidence from the October 1987 Market Crash
Vol. 18, No. 3 (Autumn, 1989), pp. 68-83
Stable URL: http://www.jstor.org/stable/3665650
Page Count: 16
You can always find the topics here!Topics: Arbitrage, Stock market indices, Prices, Stock prices, Cash, Market prices, Coefficients, Error rates, Stock futures, Trade
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Intraday data on program trading for October 14-20, 1987 are used to examine the relation between types of program trading and price movement. The S&P 500 stocks are correlated with their derivative futures contract. The association, confirmed for the days leading up to the crash, is not found on the day of the crash and controlling for nonsynchronous trading does not improve the fit. Before the day of the crash, program trading is found to be associated with price movement in the expected direction, but the association disappears on October 19 and 20.
Financial Management © 1989 Financial Management Association International