Stock market crashes happen five times faster than models predict
Finance
Modern trading algorithms react to bad news so quickly that they compress months of selling into a few days, creating a 'fat tail' where extreme moves are five times more common than expected.
Most financial models assume that stock prices move in a predictable bell curve, but the reality is far more jagged. When the S&P 500 experiences a shock, the selling propagates through the system five times faster than traditional Gaussian math predicts. This happens because of 'volatility clustering,' where one sharp drop triggers a chain reaction of automated sell orders.