In the history of Wall Street Black Monday refers to Monday, October 19, 1987, when the stock markets suffered their biggest daily drop in the history. The crash began in Far East, moved to Europe and hitting the Wall Street. The DJIA dropped by 508 points to 1738, minus 22% within a day.
Early on in 1987 stock markets gained much, the DJIA was on 44% profit in seven months. Finally after the severe drop in October the DJIA was positive for the 1987 calendar year. It opened on January 2, 1987 at 1,897 points and closed on December 31, 1987 at 1,939 points.
A popular explanation for the crash was shorting by technical and computer traders. However, economist Dean Furbush pointed out that the biggest price drops occurred when trading volume was light. After this huge drop the regulation changed and developed new rules, known as circuit breakers, allowing exchanges to halt trading temporarily in instances of exceptionally large price declines. Under the rules, the NYSE - New York Stock Exchange would temporarily halt trading when the S&P 500 stock index declines 7%, 13%, and 20% in order to allow investors to make informed choices when the market is highly volatile.
The vast majority of people thought that it was the end of the world, but within 2 month the market recovered and rallied until the .com bubble – 2000.
The BFM Assets Team.
No comments:
Post a Comment