Dow Jones (19 July 1987 through 19 January 1988)

FTSE 100 Index (19 July 1987 through 19 January 1988)

Black Monday is the name ascribed to Monday October 19, 1987. On that day, the Dow Jones Industrial Average (DJIA) fell 22.6%. In fact it was not the largest one-day percentage decline in recorded stock market history. That occured on December 12, 1914, when the DJIA fell 24.39%. The greatest point loss in DJIA history was on September 17, 2001, 684.81 points. Dow Jones (19-Jul-1987 through 19-Jan-1988). ... Dow Jones (19-Jul-1987 through 19-Jan-1988). ... The Dow Jones Industrial Average (DJIA) is one of several stock market indices created by Wall Street Journal editor and Dow Jones & Company founder Charles Dow. ... July 19 is the 200th day (201st in leap years) of the year in the Gregorian Calendar, with 165 days remaining. ... 1987 (MCMLXXXVII) is a common year starting on Thursday of the Gregorian calendar. ... January 19 is the 19th day of the year in the Gregorian calendar. ... 1988 (MCMLXXXVIII) was a leap year starting on a Friday of the Gregorian calendar. ... FTSE 100 Index ( 19 July 1987 through 19 January 1988) I, the creator of this image, hereby release it into the public domain. ... FTSE 100 Index ( 19 July 1987 through 19 January 1988) I, the creator of this image, hereby release it into the public domain. ... The Financial Times Stock Exchange Index of 100 Leading Shares, or FTSE 100 Index (pronounced footsie), is a share index of the 100 largest companies listed on the London Stock Exchange. ... July 19 is the 200th day (201st in leap years) of the year in the Gregorian Calendar, with 165 days remaining. ... 1987 (MCMLXXXVII) is a common year starting on Thursday of the Gregorian calendar. ... January 19 is the 19th day of the year in the Gregorian calendar. ... 1988 (MCMLXXXVIII) was a leap year starting on a Friday of the Gregorian calendar. ... October 19 is the 292nd day of the year (293rd in leap years) in the Gregorian Calendar. ... 1987 (MCMLXXXVII) is a common year starting on Thursday of the Gregorian calendar. ... The Dow Jones Industrial Average (DJIA) is one of several stock market indices created by Wall Street Journal editor and Dow Jones & Company founder Charles Dow. ... The stock market is the market for the trading of company stock, both those securities listed on a stock exchange as well as those only traded privately. ... December 12 is the 346th day (347th in leap years) of the year in the Gregorian calendar. ... 1914 (MCMXIV) is a common year starting on Thursday. ... September 17 is the 260th day of the year (261st in leap years). ... 2001: A Space Odyssey. ...

The Black Monday one-day decline was not confined to the United States, but was mirrored all over the world. By the end of October, stock markets in Australia had fallen 41.8%, Canada 22.5%, Hong Kong 45.8%, and the United Kingdom 26.4%.

(The terms Black Monday and Black Tuesday are also applied to October 28 and 29, 1929, the follow-ups to Black Thursday, which started the Stock Market Crash of 1929.) October 28 is the 301st day of the year (302nd in leap years) in the Gregorian Calendar, with 64 days remaining. ... October 29 is the 302nd day of the year (303rd in leap years) in the Gregorian Calendar, with 63 days remaining. ... -1... The 1929 stock market crash devastated economies worldwide The Wall Street Crash refers to the stock market crash that occurred on October 29, 1929, when share prices on the New York Stock Exchange collapsed, leading eventually to the Great Depression. ...

A certain degree of mystery is associated with the 1987 crash. Many have noted that no major news or events occurred prior to the Monday of the crash, the decline seeming to have come from nowhere. Important assumptions concerning human rationality, the efficient market hypothesis, and economic equilibrium were brought into question by the event. Debate as to the cause of the crash still continues many years after the event, no firm conclusions having been reached. Irrational exuberance is a phrase used by Federal Reserve Board Chairman Alan Greenspan in a speech given during the stock market boom of the 1990s. ... In finance, the efficient market hypothesis (EMH) asserts that financial markets are efficient, or that prices on traded assets, e. ... In economics, economic equilibrium often refers to an equilibrium in a market that clears: this is the case where a market for a product has attained the price where the amount supplied of a certain product equals the quantity demanded. ...

In the wake of the Crash, markets around the world were put on restricted trading, in many cases because sorting out the orders that had come in was beyond the computer technology of the time, and it gave the Federal Reserve and other central banks time to pump liquidity into the system to prevent a further downdraft. While pessimism reigned, the market bottomed, leading some to label Black Monday a "selling climax", where the excess value was squeezed out of the system. The Federal Reserve System is headquartered in the Eccles Building on Constitution Avenue in Washington, DC. The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. ...

Causes of the Crash

In 1986 the United States economy began shifting from a rapidly growing recovery to a slower growing expansion, which resulted in a "soft landing" as the economy slowed and inflation dropped. As 1987 wore on, it seemed that recessionary fears were behind the US economy, and there was a boom ahead. The US stock market advanced significantly, peaking in August of 1987. There were a series of volatile days, with the market sliding downward. In late August some observers warned that technical analysis indicated the market was now in a cyclical "bear" mode. However, this view was not widely subscribed to even as the market reached wider and wider swings. A bear market is a prolonged period of time when prices are falling in a financial market. ...

Potential causes for the decline include program trading, overvaluation, illiquidity, and market psychology. These theories must explain why the crash occurred on October 19, and not some other day, why it fell so far and fast, and why it was international in nature and not unique to American markets. Program trading is casually defined as the use of computers in stock markets to engage in arbitrage and portfolio insurance strategies. ... Valuation is the process of estimating the value of an asset (liability). ... Market liquidity is a business or economics term that refers to the ability to quickly buy or sell a particular item without causing a significant movement in the price. ... Nobel Prize in Economics winner Daniel Kahneman, was an important figure in the development of behavioral finance and economics and continues to write extensively in the field. ...

The most popular explanation for the 1987 crash was selling by program traders. Program trading is the use of computers to engage in arbitrage and portfolio insurance strategies. Through the 1970s and early 1980s, computers were becoming more important on Wall Street. They allowed instantaneous execution of orders to buy or sell large batches of stocks and futures. After the crash, 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 normality. Either way, program trading ended up taking the majority of the blame in the public eye for the 1987 stock market crash. In economics, arbitrage is the practice of taking advantage of a state of imbalance between two or more markets: a combination of matching deals are struck that exploit the imbalance, the profit being the difference between the market prices. ... For other uses, see Wall Street (disambiguation). ... See stock (disambiguation) for other meanings of the term stock In financial terminology, stock is the capital raised by a corporation, through the issuance and sale of shares. ... In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a set price specified on the last trading date. ... An economist is someone who studies Economics. ... Speculation involves the buying, holding, and selling of stocks, bonds, commodities, currencies, collectibles, real estate, derivatives or any valuable thing to profit from fluctuations in its price as opposed to buying it for use or for income ( via dividends, interest etc). ...

Economist Richard Roll believes that the international nature of the stock market decline contradicts the argument that program trading was to blame. Program trading strategies were used primarily in the United States, Roll writes. If program trading caused the decline, why would markets where program trading was not prevalent such as Australia and Hong Kong have declined, as well? Although these markets might have been reacting to excessive program trading in the United States, Roll points to observations that would indicate otherwise. The crash began on October 19 in Hong Kong, spread west to Europe, and hit the United States only after Hong Kong and other markets had already declined by a significant margin. A satellite composite image of Europe // Etymology Picture of Europa, carried away by bull-shaped Zeus. ...

Another common theory states that the crash was a result of a dispute in monetary policy between the G-7 industrialized nations, in which the United States, wanting to prop up the dollar and restrict inflation, tightened policy faster than the Europeans. The crash, in this view, was caused when the dollar-backed Hong Kong stock exchange collapsed, and this caused a crisis in confidence. 1983 G-7 Economic Summit in Williamsburg, Virginia (left to right) Pierre Trudeau, Gaston Thorn, Helmut Kohl, François Mitterrand, Ronald Reagan, Yasuhiro Nakasone, Margaret Thatcher, Amintore Fanfani. ...

Another theory is that the Great Storm of 1987, which happened on the Friday before the crash, helped contribute to it. In 1987 there was no Internet trading, and brokers had to physically get to work in the City of London in order do their deals. On Friday, October 16, many routes into London were closed and consequently many traders were unable to reach their offices in order to close their positions at the end of the week. This made many people nervous on both sides of the Atlantic and there were certainly some traders who believed at the time that this acted as the trigger for the panic selling which took place on Black Monday. Panic selling in London and New York, the biggest stock markets in the world, then affected other markets around the world, creating a global stock market crash. The Great Storm of 1987 occurred on October 15 and 16, 1987, when an unusually strong weather system caused hurricane force winds to hit much of the south of England. ...

Further reading

• Jude Wanniski, The Way the World Works (1978).

Jude Thaddeus Wanniski (June 17, 1936, Pottsville, Pennsylvania – August 29, 2005, Morristown, New Jersey) was an economist, journalist and conservative commentator. ...

External links

• Black Monday 1987 at stock-market-crash.net
• [1] obscure reference indicating numeric overflow in trading programs may have been an issue (see section 3.2).