International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

The Faces of Fear in the Flight to Quality during the Lehman Brothers Failure and the Flash Crash
Reinhold P. Lamb

September 15, 2008 and May 6, 2010 mark events that shook the financial markets and sparked investor fears to quickly flee to quality financial instruments. The Lehman Brothers failure and the Flash Crash produced investor responses that were rapid and profound. Investors discriminated across high quality products and the ones with the highest levels of safety attracted funds. The panic from the Lehman announcement produced a longer term refuge in the safety of quality. The fear from Flash Crash lasted only 30 minutes. Both events provide a look at the difference between investor behavior that is predicated on real fear rather than on engaged portfolio managers actively rotating in and out of sectors as their outlook changes.

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