The Chinese Stock Markets on Trial: The Fat Finger Accident of Everbright Securities

摘要

Everbright Securities Ltd. erroneously submitted huge quantities of buy orders on SSE180 constituent stocks from 11:05 through 11:07 on 16 August 2013. This fat finger accident had a pronounced impact on the Chinese stock markets. This paper uses the accident to study market quality and investors' responses. We show that the Chinese stock markets were robust enough to stand the trial, exhibiting deep depths and strong resiliency. However, the markets performed poorly in terms of aggregating information because there were large price swings after the erroneous orders were executed. Moreover, investors quickly change their beliefs as to the reasons to the dramatic price jumps, consistent with information cascade theory.