1987 Stock Market Crash
Economic History of West
Kevin Capuder
U.S. Stock Market Crash in 1987
Ana Barbakadze, Mariam Jakeli
This paper contributes to the overview of U.S. Stock Market Crash of 1987 and it explores the major causes and effects of this crash. According to the Reuters, the crash of 1987 is included in the top five “major stock market crashes” (Narayana). Let us now define this term itself. Stock Market Crash associates with “A rapid and often unanticipated drop in stock prices”(Investopedia). As we can see, this process reflects the decline in stock prices, which likely has a dramatic effect on the global economy. The first biggest occurrence of stock market crash was in 1929, which was followed by the “Great Depression”. The second and not less serious crash was exactly in 1987, which we are going to discuss in the following sections. The next one occurred after ten years, with the epicenter in Asia. The last two vital crashes were in 21st century; one was in 2001 and the other in 2007 (Narayana). All of these crashes damaged the world economy, but the crash of 1987 still stands out. The reason why we chose this crash is that it is characterized as having “the largest one-day decline in stock market values in U.S. history” (Mishkin and White). It is also often compared to the crash of 1929, but it brought much loss to the stock market, for example, in 1929 the Dow Jones index fell by 12.8 per cent, while in October of 1987 it experienced 22.6 per cent decline (Mishkin and White). “ The crash wiped 22.6 percent off the value of the New York Stock Exchange, compared with 12.8 percent on the worst day of the 1929 Wall Street Crash” (Narayana). In the following paragraphs, we will discuss some major causes and effects of this crash and we will also look at the process itself.
First of all, before analyzing the causes of 1987 Stock Market Crash, it is necessary to look at the facts that occurred prior to the crash. The first and the most important lead-to-crash
Kevin Capuder
U.S. Stock Market Crash in 1987
Ana Barbakadze, Mariam Jakeli
This paper contributes to the overview of U.S. Stock Market Crash of 1987 and it explores the major causes and effects of this crash. According to the Reuters, the crash of 1987 is included in the top five “major stock market crashes” (Narayana). Let us now define this term itself. Stock Market Crash associates with “A rapid and often unanticipated drop in stock prices”(Investopedia). As we can see, this process reflects the decline in stock prices, which likely has a dramatic effect on the global economy. The first biggest occurrence of stock market crash was in 1929, which was followed by the “Great Depression”. The second and not less serious crash was exactly in 1987, which we are going to discuss in the following sections. The next one occurred after ten years, with the epicenter in Asia. The last two vital crashes were in 21st century; one was in 2001 and the other in 2007 (Narayana). All of these crashes damaged the world economy, but the crash of 1987 still stands out. The reason why we chose this crash is that it is characterized as having “the largest one-day decline in stock market values in U.S. history” (Mishkin and White). It is also often compared to the crash of 1929, but it brought much loss to the stock market, for example, in 1929 the Dow Jones index fell by 12.8 per cent, while in October of 1987 it experienced 22.6 per cent decline (Mishkin and White). “ The crash wiped 22.6 percent off the value of the New York Stock Exchange, compared with 12.8 percent on the worst day of the 1929 Wall Street Crash” (Narayana). In the following paragraphs, we will discuss some major causes and effects of this crash and we will also look at the process itself.
First of all, before analyzing the causes of 1987 Stock Market Crash, it is necessary to look at the facts that occurred prior to the crash. The first and the most important lead-to-crash
Cited: Wall Street Journal. "The Day the Dow Fell: Brokers Trade Stocks, Fists; Bulls and Bears Are Joined by Ducks and Chickens." Wall Street Journal (1987): 15. —. "Trade-Gap News Sends Stock Market Reeling Into a Record Tailspin." Wall Street Journal (1987): 1. Winkler, M and T Herman. "Pressure for Higher Rates is Building As Central Banks Fight Inflation Fear." Wall Street Journal (1987): 3. Carlson, Mark. "A BRIEF HISTORY OF THE 1987 STOCK MARKET CRASH WITH A DISCUSSION OF THE FEDERAL RESERVE RESPONSE." Finance and Economics Discussion Series, divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board (2006). Garcia, B. "An Appraisal: Portfolio Insurance Could Fuel Stocks ' Fall, Critics Say." Wall Street Journal (1987): 43. Greenspan, A. "Statement and comments of Alan Greenspan, Chairman of the Federal Reserve." Black Monday, The Stock Market Crash of October 19, 1987 (1988). Katzenbach, N. An Overview of Program Trading and Its Impact on Current Market Practices. New York: The New York Stock Exchange, 1987. Narayana, Nagesh. "Stock markets around the world tumbled on Monday." FACTBOX: Major stock market crashes (2008). Murray, A. "Stock Market 's Frenzy Puts Fed 's Greenspan in a Crucial Position." Wall Street Journal (1987): 1. Mishkin, Frederic S. and Eugene N. White. U.S. STOCK MARKET CRASHES AND THEIR AFTERMATH IMPLICATIONS FOR MONETARY POLICY. Working paper. Cambridge: NATIONAR BUREAU OF ECONOMIC RESEARCH, 2002.