This paper studies the intraday spillovers of the 2010 U.S. Flash Crash to international equity markets. We document a substantial and almost immediate echo of the crash in Latin America. Using data for 148 firms trading in Argentina, Brazil, Chile, or Mexico, we estimate price declines of up to 10% within minutes after the U.S. crash. Estimates for two different factor models indicate that this echo followed from normal interdependence rather than financial contagion. There is no evidence of contagion for firms with strong links to the U.S. economy.
Keywords: flash crash, stock returns, Latin America, spillovers, contagion.
JEL classifications: G1, N2.
Working paper no. 589