The Michigan Engineer News Center

Predicting the next stock market ‘flash crash’

IOE professor Romesh Saigal discusses ways to anticipate market fluctuations.| Short Read

Soon after the Great Recession, the U.S. stock markets plunged – and rebounded within 36 minutes. The Dow Jones Industrial Average dropped more than 9%, losing more than 1,000 points before suddenly recovering.

This May 6, 2010 event was the first recorded “flash crash.” While it didn’t have long-term effects, it raised concerns among investors about the stability of stock market.

Computers have made trading faster and more efficient, but they also can create instability in the markets. Today, quantitative analysts use complex algorithms to make many trades in many markets within a fraction of a second. These new algorithms now account for more than half of all trades. But this may lead to even more flash crashes.

As engineers, we were interested in that May 2010 crash. No single reason can explain why flash crashes happen. But are there ways to predict and mitigate these anomalies? We took on the challenge of developing a theory that may help predict flash crashes.

Read the full story in The Conversation.

Portrait of Gabe Cherry

Contact

Gabe Cherry
Senior Writer & Assistant Magazine Editor

Michigan Engineering
Communications & Marketing

(734) 763-2937

3214 SI-North

Researchers
The electrons absorb laser light and set up “momentum combs” (the hills) spanning the energy valleys within the material (the red line). When the electrons have an energy allowed by the quantum mechanical structure of the material—and also touch the edge of the valley—they emit light. This is why some teeth of the combs are bright and some are dark. By measuring the emitted light and precisely locating its source, the research mapped out the energy valleys in a 2D crystal of tungsten diselenide. Credit: Markus Borsch, Quantum Science Theory Lab, University of Michigan.

Mapping quantum structures with light to unlock their capabilities

Rather than installing new “2D” semiconductors in devices to see what they can do, this new method puts them through their paces with lasers and light detectors. | Medium Read