How Many Years Ago Was 2008 – Stock price chart showing the stock market crash in 2020 showing a sharp drop in stock prices after a recovery.
A stock market crash is a sudden drop in stock prices in a major sector of the stock market that results in a significant loss of portfolio wealth. Crashes are caused by panic selling and major economic factors. These often follow economic speculation and bubbles.
How Many Years Ago Was 2008
A stock market crash is a social phenomenon in which external economic events combine with crowd psychology in a positive feedback loop in which selling by some market participants leads to selling by more market participants. In general, crashes tend to occur in the following situations: a prolonged period of rising stock prices (bull market) and excessive economic optimism, a market in which the price-to-earnings ratio exceeds long-term averages, and extensive use of leveraged and leveraged debt by market participants. Other factors such as wars, major corporate hacks, changes in federal laws and regulations, and natural disasters in economically productive areas can also cause significant declines in the market value of a wide range of stocks. Stock prices for corporations that compete with affected corporations may rise despite the crash.
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There is no specific numerical definition of a stock market crash, but the term is commonly used to refer to a drop of more than 10% in a stock market index over a period of several days. Crashes are often different from bear markets (periods of declining stock prices that can be measured over months or years) because crashes involve panic selling and sudden, sharp price drops. Crashes are often associated with bear markets; but they don’t necessarily happen at the same time. For example, Black Monday (1987) did not result in a bear market. Similarly, the bursting of Japan’s asset price bubble occurred for several years without a significant breakout. Stock market crashes are not uncommon.
Events are usually unexpected. As Niall Ferguson has stated: “Before the collapse, our world seems almost fixed, deceptively balanced, at a fixed point. So when the crash finally happens – as it inevitably will – everyone is shocked. And our brain tells us it’s not time to crash.”
The Tulip Mania (1634-1637), in which some single bulbs of tulips sold for more than 10 times the annual income of a skilled craftsman, is often considered the first recorded economic bubble.
In 1907 and 1908, the stock price fell by about 50% due to various factors resulting from the development of copper reserves by the Knickerbocker Trust Company.
Stock Market Crash
Several investment trusts and banks that invested in the stock market collapsed and began to close. Thanks to the intervention of JP Morgan, another bank operation was prevented.
The economy grew for most of the twenties. It was a technological golden age as innovations such as radio, automobiles, aviation, the telephone, and the power grid were implemented and adopted. Companies that pioneered these developments, including Radio Corporation of America (RCA) and General Motors, saw their stocks soar. Financial corporations also did well as Wall Street bankers created mutual fund companies (known as investment trusts) such as Goldman Sachs Trading Corporation. Investors are fascinated by the returns available in the stock market, particularly the use of leverage through margin lending (ie, borrowing money from a broker to finance part of a stock purchase, using the securities purchased as collateral).
On August 24, 1921, the Dow Jones Industrial Average (DJIA) was 63.9. By September 3, 1929, it increased more than six times and reached 381.2. It has not reached this level for 25 years. By the summer of 1929, it was clear that the economy was in decline and the stock market was experiencing a series of volatile price declines. These declines fueled investor anxiety, and the evts peaked on October 24, 28, and 29 (known as Black Thursday, Black Monday, and Black Tuesday, respectively).
On Black Monday, the DJIA fell 38.33 points to 260 points, down 12.8%. The deluge of selling engulfed the ticker tape system, which normally gave investors the current price of their stocks. Telephone and telegraph lines were blocked and they could not cope. This information gap has only fueled more fear. New age technology, once much celebrated by investors, has now served to deepen their suffering.
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The next day, Black Tuesday, was a day of chaos. Overleveraged investors forced to liquidate their stocks due to margin calls flooded the exchange with sell orders. During the day, the Dow fell 30.57 points to close at 230.07. The beautiful resources of this period have decreased in value. In two days, the DJIA fell 23%.
On the weekday of November 11, 1929, the index was 228, down 40% from the September high. Markets recovered in the following months, but it was a temporary rebound that led unsuspecting investors to further losses. The DJIA lost 89% of its value before bottoming out in July 1932. This crash was followed by the Great Depression, the worst economic crisis of modern times, which affected the stock market and Wall Street throughout the 1930s.
The mid-1980s was a period of strong economic optimism. From August 1982 to its peak in August 1987, the Dow Jones Industrial Average (DJIA) rose from 776 to 2722. The growth of the market index for the 19 largest markets in the world during this period was an average of 296%. The average number of shares traded on the New York Stock Exchange rose from 65 million shares to 181 million shares.
The crash on October 19, 1987, Black Monday, was the culmination of a market crash that began five days earlier on October 14. The DJIA fell 3.81% on October 14th, followed by a 4.60% fall on Friday, October 16th. On Black Monday, the DJIA fell 508 points and lost 22.6% of its value on the day. The S&P 500 fell 20.4% to 225.06 from 282.7. The NASDAQ Composite lost just 11.3%, not because the sellers lost out, but because the NASDAQ market system failed. On the heels of the sell orders, many NYSE stocks faced suspensions and trading delays. Of the 2,257 stocks listed on the NYSE, there were 195 trading delays and suspensions during the day.
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The NASDAQ market fared much worse. Liquidity in NASDAQ stocks dried up due to reliance on a “market-making” system that allowed market makers to exit trades. The multi-sector trade countered the pathological condition where the bid price of the stock was higher than the ask price. These “sticky” conditions have significantly reduced turnover. On October 19, Microsoft shares traded on NASDAQ for a total of 54 minutes.
The crash was the biggest one-day loss Wall Street had ever seen in continuous trading. Between the start of trading on October 14 and the end of October 19, the DJIA lost 760 points, representing a decline of more than 31%.
In October 1987, all major world markets were down or down significantly. The FTSE 100 lost 10.8% on Monday and 12.2% the following day. The least affected was Austria (11.4% decrease) and the most affected was Hong Kong with a 45.8% decrease. 19 of the 23 major industrialized countries saw a decline of more than 20%.
Despite fears of a repeat of the Great Depression, the market recovered immediately after the crash and registered 102.27 points the next day and 186.64 points on Thursday, October 22. It took just two years for the Dow to fully recover. ; by September 1989 the market had regained all the value it had lost in the 1987 crash. The DJIA rose 0.6% during the hot year of 1987.
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No definitive conclusions have been reached about the causes of the 1987 crash. Stocks have been in a bull run for several years, and the price-to-earnings ratio in the US market has been above the post-war average. The S&P 500 was trading at 23 times earnings, the highest since the war, and higher than the average of 14.5 times.
Herd behavior and psychological feedback loops play an important role in all stock market crashes, but analysts have also tried to look for externally triggered events. In addition to general concerns about the overvaluation of the stock market, the decline was driven by factors such as program trading, portfolio insurance and derivatives, and earlier news of worsening economic performance (ie a large US goods trade deficit and a US dollar that looked it seemed, they accused, implying a future interest rate increase).
One of the consequences of the crash of 1987 was the introduction of injection or reduction trading on the NYSE. Based on the idea that a cooling-off period will help eliminate panic selling, this mandatory market closure is triggered when a pre-determined market decline occurs during the trading day.
Closing price of OMX Iceland 15 for the five trading weeks from September 29, 2008 to October 31, 2008.
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On September 15, 2008, the bankruptcy of Lehman Brothers and the collapse of Merrill Lynch combined with the American liquidity crisis.
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