| Stock market collapse week, where market made a loss of hundreds of billion dollars, finished with a drop in stock prices worldwide.
In continuation, confidence of investors in the shares of American companies was shattered by series of corporate scandals. Drop in prices of shares and securities of Europe and Asia was noticed.
Just on Friday, London index FTSE lost 4.6% and Frankfurt Dax – 5% of the value.
Stock market crash – sharp dip in share prices in stock exchanges. In parallel with various economic factors, reason for stock market crash is also due to panic. Often, stock market crashes end up with speculative economic bubbles (For example: Dotcom – bubble).
Most famous stock market crash started on 24 October 1929 on Black Thursday. Industrial average of Dow Jones lost 50% during the stock market crash. This was the beginning of Great Depression.
Another famous crash took place on 19 October 1987 – Black Monday. On Black Monday itself, Dow Jones fell by 22% after completing 5 year continuous rise in share prices.
Black Monday – Monday the 19th October 1987: Day, on which significant dip by 22.6% in industrial average of Dow Jones for the entire history was witnessed. This event has not only shaken USA but quickly spread across the world. Thus, by the end of October, stock exchanges in Australia lost 41.8%, Canada lost 22.5%, Hong Kong -45.8% and Great Britain – 26.4%.
Names “Black Monday” and “Black Tuesday” are also used for 28th and 29th October 1929, which followed Terrible Thursday – starting day of stock market crash in 1929.
Crash in 1987 raises some mysticism – main news or events did not precede the catastrophe and visible reasons for the collapse were not identified. This event had put many important assumptions, of modern economic science, under uncertainty: Theory of rational conduct of human being, theory of market equilibrium and hypothesis of market efficacy.
For some time after the crash, trading in stock exchanges worldwide was halted, since the exchange’s computers did not perform well owing to enormous quantity trades, being received. This halt in trading allowed Federal Reserve System and central banks of other countries to take measures to control the spreading of worldwide financial crisis. |
Stocks of Dow Jones industrials and Standard and Poor 500 index had the
worst week in 5 years, with over a trillion dollars wiped from the
shareholders. The stock fall was initiated by investors' concerns
about rising borrowing costs for companies and homeowners. High loan
costs already caused the decline of real estate markets across the
USA, with some states (e.g. Florida) seeing as much as 50% drop in the
real estate sales.
