Stock Price and Trading Volume during Market Crashes

  •  Rodion Remorov    


We present a model for stock price and volume behaviour during market crashes. The model incorporates amarket mechanism for the share exchange between buyers and sellers while taking into account their cashbalances. Using an analytical approach and the Monte-Carlo technique for the simulation of the trading volume,we analyzed the dynamics of the stock price and trading volume during market crashes. The trading volume wassimulated through the trading exchange process using Monte-Carlo technique. We found that trading volume isinversely proportional to the square of the stock price in the case of the sharp price declines. This result isempirically supported in price and volume data for major recent US stock bankruptcies and market crashes,including Lehman Brothers Inc, Enron, Wachovia, Washington Mutual, Citigroup, Merrill Lynch, and MFGlobal. The results of the analytical approach may be used for marketing analysis of the sales in the case of theshocking market conditions.

This work is licensed under a Creative Commons Attribution 4.0 License.
  • ISSN(Print): 1918-719X
  • ISSN(Online): 1918-7203
  • Started: 2009
  • Frequency: quarterly

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