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INVESTOR REACTION TO EXTREME PRICE SHOCKS IN STOCK MARKETS

  • Unique Paper ID: 166026
  • Volume: 11
  • Issue: 1
  • PageNo: 2465-2473
  • Abstract:
  • Investor reaction to extreme price shocks in stock markets is a critical area of study in financial economics, as it provides insights into market dynamics and investor behavior. Extreme price shocks, often triggered by unexpected events or economic news, can lead to significant volatility and uncertainty in the markets. These shocks challenge the traditional assumptions of rational behavior and efficient markets, revealing a more complex interplay of psychological, institutional, and informational factors that drive investor decisions. This study explores how different types of investors, ranging from individual retail investors to large institutional players, respond to extreme price shocks and the subsequent impact on market stability and efficiency. The research indicates that investor reactions to extreme price shocks are highly heterogeneous. Retail investors often exhibit panic selling or herding behavior, driven by fear and uncertainty, which can exacerbate market volatility. In contrast, institutional investors, equipped with more resources and sophisticated risk management strategies, may adopt a more measured approach, either by taking advantage of the price dislocations to buy undervalued assets or by implementing strategies to hedge against further risks. This divergence in behavior between retail and institutional investors can lead to temporary market inefficiencies, creating opportunities for arbitrage but also posing risks for systemic stability if not properly managed.
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Cite This Article

  • ISSN: 2349-6002
  • Volume: 11
  • Issue: 1
  • PageNo: 2465-2473

INVESTOR REACTION TO EXTREME PRICE SHOCKS IN STOCK MARKETS

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8.01 (Year 2024)
UGC Approved
Journal no 47859

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