There is no numerically-specific definition of a crash but the term commonly applies to steep double-digit percentage losses in a stock market index over a period of several days or A precipitous drop in market prices or economic conditions also called crash.
"A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market. "
"What goes up must come" down are the simple lines but when it applies to stock market,this old saying carry a lot of weight.because when a stock market comes down after having went up over a long period, the devastation it sometimes leave behind is horrible .
Crashes usually occur under the following conditions:
- A prolonged period of rising stock prices and economic optisim,
- A market where P/E ratios exceed long-term averages, and
- Extensive use of margin debt and leverage by market participants
THE CRASH OF 1929
The wall steet crash of 1929,happened on october 29,1929 is the most famous crash and considered to be the worst stock market crash in the american history, according to the reports investors lost almost 90% of their money over the course of crash.It consists of Black Thursday, the initial crash and Black Tuesday, the crash that caused general panic five days later some economists and historins regard it as the start of the Great depression.
A record number of 12.9 million shares were traded on that day.
In 1931, the Pecora Commission was established by the U.S. senate to study the causes of the Crash. The U.S. Congress passed the Glass-Steagall Act in 1933, which mandated a separation between commercial-banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute atocks, bonds, and other securities.The crash marked the beginning of widespread and long-lasting consequences for the United States.It result in rise of mass unemployment and the depression is seen as a direct result of the crash .Therefore the Wall Street Crash is widely regarded as signaling the downward economic slide that initiated the Great Depression.
THE CRASH OF 1987
In the days between October 14 and October 19, 1987, major indexes of market valuation in the United States dropped 30 percent or more. On October 19, 1987, a date that subsequently became known as "Black Monday,".The Dow lost 22.6% of its value or $500 billion dollars on October 19 th 1987.The Black Monday decline was the second largest one-day percentage decline in stock market history.
Initial blame for the 1987 crash centered on the interplay between stock markets and index options and futures markets and many blamed program trading strategies for blindly selling stocks as markets fell, exacerbating the decline. Some economists theorized the speculative boom leading up to October was caused by program trading, while others argued that the crash was a return to normalcy.
Market crashes are random, unpredictable events,certain warning signs exist, which characterize the end of a bull market and the start of a bear market. By learning these common warning signs, you can liquidate your investments and prosper by shorting the market.
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