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Presentations at an Academic or Professional conference (1997), Conférence annuelle de l'European Economic Association

Stop-loss Strategies, Market Volatility and Crashes

Using a simple model with two groups of agents, risk-averse, mean-variance and stop-loss investors, we find that active selling by the latter causes price instability and may cause crashes , moreover, even in the absence of active trading on their part, their presence increases the volatility and decreases the equilibrium price in the periods preceding their possible activity.

CHARLETY-LEPERS, P. and PORTAIT, R. (1997). Stop-loss Strategies, Market Volatility and Crashes. In: Conférence annuelle de l'European Economic Association.