Black Monday 1987

The Stock Market Crash of 1987: Black Monday The “S&P 500”, or “Standard and Poor’s 500 Index”, is an index of 500 stocks that is designed to be a leading indicator of U.S. equities and is meant to reflect the risk and return characteristics of all stocks in the United States market. This, along with the Dow Jones Industrial Average, is one of the most commonly used benchmarks to determine how well the market is doing, and it is even considered by many experts to be the definition of the U.S. market. On October 19, 1987, a day known as Black Monday, the S&P 500 fell about 20 percent in what was one of the largest stock market crashes in United States History. The causes of the crash are derivative securities, computer trading, illiquidity, and the U.S. trade and budget deficits. While most economists generally consider these to be the causes of the 1987 stock market crash, they are frequently debated, and there is evidence to both sides of the argument for each cause. Securities are something that you can own and trade on a secondary market. They allow you to own a certain asset without ever actually taking possession of the asset. There are three types of securities, which are equity securities, debt securities, and derivative securities. Equity securities mainly involve stocks and the stock market. This involves buying and selling shares of a corporation on a stock trading market such as the NASDAQ, NYSE, and many foreign markets. Debt securities are loans that you give to companies or even the government in the form of bonds. When a company needs to raise money for any particular reason they issue bonds at a certain price with an interest rate that allows the buyers to gain an almost guaranteed profit on their investment. Many investors prefer to invest in bonds instead of stocks because they are safer and much less of a risk to take. However, with risk comes reward and the stock market can provide a large reward if played correctly. The last type

Cited: Michael. Liar’s Poker. New York: Penguin, 1990. Print. http://www.federalreserve.gov/pubs/feds/2007/200713/200713pap.pdf http://web.ebscohost.com/hrc/detail?sid=d6886e84-eba1-479c-91b6-cfe96a85b7e0%40sessionmgr11&vid=7&hid=18&bdata=JnNpdGU9aHJjLWxpdmU%3d#db=khh&AN=27004513 http://hnn.us/articles/895.html http://www.investopedia.com/ http://useconomy.about.com/od/glossary/g/securities.htm http://www.wisegeek.com/what-is-portfolio-insurance.htm