Stock Market

What Is A Stock Market Crash And Why Is It Bad?

A stock market crash can be summed up as a situation where share prices of stock listed on the stock exchanges plummet. Although there are a number of economic factors that will cause a stock market crash, a reason for stock market crashes is also the investing public’s loss of confidence in the economy and mass panic.

A stock market crash can be summed up as a situation where share prices of stock listed on the stock exchanges plummet. Although there are a number of economic factors that will cause a stock market crash, a reason for stock market crashes is also the investing public’s loss of confidence in the economy and mass panic.

Quite often, the aftershock of stock market crashes can be dismal for a country’s economy. There have been awful stock market crashes that resulted in the loss of billions of dollars, and as a growing number of people become involved in the stock market, crashes have touched more lives as of late.

One of the most notorious stock market crashes started on October 24, 1929 and would be known as Black Thursday. The Dow Jones Industrial lost fifty percent during this stock market crash, kicking off the beginning of the Great Depression. Another famous crash happened on October 19, 1987, also known as Black Monday. The crash started in Hong Kong but quickly blazed around the world.

By the close of October, stock markets in Hong Kong had fallen 45.5%, the United States had fallen 22.68%, and Australia, Spain, the United Kingdom and Canada suffered from huge problems additionally. In stock market history, this marked the largest one day percentage fall – the Dow Jones fell by 22.6% in one day.

Nobody could seem to explain the crash in 1987. The main news and events at the time couldn’t predict the disaster and any obvious reasons for the collapse could not be identified. This crash brought many questions to the minds of economists about the theories and assumptions of modern economics. After the crash, computer systems were upgraded in the stock exchanges to handle larger trading volumes more efficiently. The New York Stock Exchange also introduced the concept of a circuit breaker, which halts trading if the Dow declines a prescribed number of points for a prescribed amount of time.

Mallory Megan works for Rapid Recovery Solution and writes articles on medical collection agencies.