World Stock Market Crashes |
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| A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market; it cannot be defined with specific number statistics but should the losses in a stock market decrease in a double digit percentage over a period of days this is commonly known as a crash. |
| A Stock Market Crash can leave devastation in its wake; this is due to the facts that preceding the crash, investors have been benefiting from a long period of highs. |
| When the crashes occur it usually happens after there has been a lengthy period of rising prices and economic optimism, or where a market exceeds the long term averages of P/E ratios, also the market participants have made extensive use of margin debt and leverage. |
| The Crash of 1929 |
| On October 29th of 1929 the worst stock market crash in American history occurred. The Wall Street Crash saw investors lose 90% of their money. Over the course of the crash we saw Black Thursday, the initial crash and Black Tuesday, where the panic really set in, five days later. This crash is viewed by many economists and historians as the start of The Great Depression. |
| The US Senate established the Pecora Commission in 1931 to study the causes of the crash, and in 1933 a bill was passed in the US Congress, The Glass Steagall Act. The Act mandated a separation between Commercial and Investment banks. |
| It is widely believed that the Wall Street Crash contributed and marked the beginning of the downward economic slide that started the Great Depression where mass unemployment was prevalent. |
| The Crash of 1987 |
| Between October 14th and Black Monday, October 19th 1987 the market valuation saw major indexes drop by over 30% in the US. The DOW lost 22.6% ($500 billion) and Black Monday is now the second largest one day percentage loss in stock market history. |
| It was the interplay between the stock, futures and index markets that received the initial blame, however many feel that the program trading strategies of continuing to sell stocks even as the markets fell. |
| There is much to be learned from these crashes, the fact that they are unpredictable and random. It helps to be aware of the existing early warning signs, in determining the end of a bull market and the beginning of the bear market. With the knowledge of these warning signs, you can preempt and liquidate your investments. |
| Nifty and its Relation with Indian Economy | Investing during Bear and Bull Markets |
