Stock Price and Trading Volume during Market Crashes

Rodion Remorov

Abstract


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.

Full Text: PDF DOI: 10.5539/ijms.v6n1p21

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Marketing Studies  ISSN 1918-719X(Print) ISSN 1918-7203(Online)

Copyright © Canadian Center of Science and Education

To make sure that you can receive messages from us, please add the 'ccsenet.org' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.