How shocks are changing stock exchange trading

DMost people will have noticed that this crisis is different from all the others before. Only very few will have experienced such a state of emergency during their lifetime that has changed the lives of almost everyone so radically so quickly. A look at the stock exchanges shows that this crisis is so special, as an analysis by the Consorsbank shows. The BNP Paribas subsidiary examined how trading changed during crises on a weekly basis and ranked it on a weekly basis.

In week 11, when the Dax saw the largest daily loss in its history, securities trading rose sharply. The normal average number of purchases and sales was exceeded by 170 percent – an absolute record. Places 2 to 4 also go to the Corona crisis.

Stress relief after negative developments

Contrary to what one would expect, it is not one-off events such as terrorist attacks or natural disasters that move the stock exchanges the most. In the majority of cases, tension is relieved after other events such as negative economic development have brewed for weeks or months.

An example of this is trading in calendar week 32 in 2011. Prices slumped around the world on black Monday on August 8th. At the time, the rating agency Standard & Poor’s downgraded the United States’ credit rating from AAA to AA +. At that time, trade was 115 percent above the annual average.

The context also showed that it doesn’t matter which region the impulse comes from. Global issues dominate, but even if events only took place in the United States, they have had an impact on global stock exchange trading.

It is also surprising that many events that were actually perceived as drastic did not lead to exaggerated reactions. So the attack on the World Trade Center did not cause a major spike in trade numbers. One possible explanation: trading on Wall Street was suspended for a few days at the time, and German investors reacted with a delay after the first shock, probably also because the dimension of the attack would only become apparent in the coming weeks. In addition, there was a longer drop in prices on the stock exchanges.

The Brexit vote in Great Britain in 2016, the annexation of Crimea in 2014 and the election of Donald Trump as American president also left no lasting impression on the volume of trade. The Consorsbank therefore concludes with the words: “Media attention and global political significance are not always necessarily extreme fuel for the stock market.”

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