Crash history market stock
History of the stock market comprises of many crashes. Crash in the stock market takes place when there is a sudden drop in the price of the shares. Crashes are affected by external economic factors and the behavior of the investor. Crashes generally occur when the profit earning ratio exceeds the averages, the leverage adopted by companies, amount of debt in the companies. There is no measurement of a crash but there is loss of double digit percentages in the stock market index.
One of the most famous crashes took place on 29 October, 1929. Economy was growing rigorously. This age was flourishing with the innovation of radios, telephones, automobiles etc. Prices of the stock soar high up. Investors also got inclines towards investing in various fields. In the month of September prices rose as high as 381.2 but in early October there seemed a decline in the rates of the shares. Investors started selling their stock. There was a decline of 23 to 40 % in the prices of the stock. A long span of time was taken by the market to regain its position. In 1930 there was an increment by 30 percent in the prices. Then in July 1932 ones again the market observed a drop in the prices as low as in the year 1929. But in 1932 the market was able to cover the loss to some extent. Reasons for the crash included overvaluation of stock, hike in the interest rates, low margin requirements and poor banking structure.
The other crash which hit the investors badly was in 1987. This crash was a great loss world wide. In one day on October 19 DJIA declined by 31% and lost 760 points. FTSE lost 12.2% index. All the markets declined in the month of October. This crash had affected Hong Kong greatly with the decline of 45.8%. Austria was least affected with the drop of 11.4%. Market lost half a trillion of wealth in this crash. Overvalued stocks, lack of liquidity in the market, where there were many sell orders were some of the reasons found for the occurrence of the crash. It took a long time to cover the loss of the crash. In September 1989 the loss was wholly recovered.
Since 1992 to 2000 ones again stock market and the economy flourished with high prices in the stock. But on September 2 in 2000 NASDAQ dropped by 45.9% which was initially at 4234.33 points. Following in the month of October there was a decline of 78.4% with the reading of 1108.49 points. There was a total loss of 8 trillion dollars. The losses of the crash were regained in the year March 2000. The reason for occurrence of the crash includes the corruption existing in the corporate sector. Many companies hide their debts and had shown huge profits. The other reason was the advent of innumerable investors in the market. With the development of online trading systems people got interested in trading in the stock markets hence the market was full of new and inexperienced traders.
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