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Who Moves Markets in a Sudden Marketwide Crisis? Evidence from 9/11

Published online by Cambridge University Press:  10 June 2016

Timothy R. Burch ,
Douglas R. Emery  and
Michael E. Fuerst
Timothy R. Burch*
Affiliation:
tburch@miami.edu, University of Miami, School of Business Administration, Coral Gables, FL 33124.
Douglas R. Emery
Affiliation:
demery@miami.edu, University of Miami, School of Business Administration, Coral Gables, FL 33124.
Michael E. Fuerst
Affiliation:
mfuerst@miami.edu, University of Miami, School of Business Administration, Coral Gables, FL 33124.
*
*Corresponding author: tburch@miami.edu
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Abstract

We compare reactions in the prices and trading patterns of common stocks and closed-end funds (CEFs), securities with substantially different investor clienteles, to the Sept. 11, 2001 terrorist attacks. When the market reopened 6 days later, retail investors sold and there were sharp price declines, even in assets with net institutional buying. In the subsequent 2 weeks, price reversals were substantially security specific and thus not simply due to improved systematic sentiment. Consistent with microstructure theory, comparisons between CEFs and common stocks show the speed of these reversals depended significantly on the relative quality and availability of information about fundamental values.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 51 , Issue 2 , April 2016 , pp. 463 - 487
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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