Complexity Digest 2011.16 - 06
Editor-in-Chief: Carlos Gershenson
Founding Editor: Gottfried Mayer
Market Instability: Why Flash Crashes Happen, NECSI
Excerpt: The markets have been volatile recently. Various securities have experienced "mini flash crashes": they suddenly lose a large fraction of their value, and regain it just as quickly. These are smaller â€" but still very important â€" versions of what happened in May 2010, when the stock market lost and regained almost 10% of its value within minutes. This behavior suggests that the markets are unhealthy. Markets are generally considered to accurately determine the underlying value of assets in the real world. During a flash crash, the price is determined by the dynamics of the market rather than by real-world value.
- Source: Market Instability: Why Flash Crashes Happen
[ http://necsi.edu/research/economics/whyflashcrashes.html ], Vedant Misra, Yaneer Bar-Yam, NECSI Report #2011-08-02